Rachel Reeves, during an interview with Martin Lewis, has confirmed that individuals whose sole income is the state pension are exempt from paying taxes. In the recent Budget announcement, the Chancellor disclosed a 4.8% increase in the state pension, raising the full new state pension to £241.30 per week in April 2026. This amount is slightly below the £12,570 personal allowance, the threshold before tax obligations kick in.
Concerns were raised by analysts that millions of pensioners relying solely on the state pension might face tax liabilities when the pension increases again in April 2027. The state pension is adjusted annually based on the triple lock mechanism. The Chancellor also assured that those receiving only the basic or new state pension will not be subjected to paying taxes through Simple Assessment.
Despite the state pension nearing the tax threshold, the Chancellor clarified to Martin Lewis that individuals with only the state pension as income will remain tax-exempt for the current parliamentary term. However, from 2027, tax obligations may apply as the full new state pension surpasses the tax-free allowance. The details on how this tax arrangement will function were not elaborated upon at the moment.
The triple lock system guarantees that the state pension escalates each April in accordance with the highest of earnings growth between May to July, September inflation, or a minimum of 2.5%. With the wage growth for May to July recorded at 4.8%, this figure will dictate the state pension increase for April 2026.
