Rachel Reeves, in discussion with Martin Lewis, confirmed that individuals relying solely on the state pension as their income would not be subject to tax obligations. The Chancellor announced in the Budget a 4.8% increase in the state pension, elevating the full new state pension from £230.25 weekly to £241.30 weekly (£12,547.60 annually) by April 2026.
This adjustment places the state pension just below the £12,570 personal allowance threshold, where tax liability begins. Concerns were raised by analysts that the incremental rise in the state pension by April 2027 could expose millions of pensioners dependent on the state pension to tax implications.
Under the triple lock system, the state pension sees annual increments. The Chancellor specified that individuals solely receiving the basic or new state pension would be exempt from “paying small amounts of tax through Simple Assessment.”
While the new full state pension is in close proximity to the tax-free threshold, Reeves assured in an interview with Martin Lewis that during this Parliament term, no tax payments would be required for those relying solely on the state pension. Looking ahead, she mentioned ongoing considerations for a simplified solution.
Martin Lewis noted that starting from 2027, the full new state pension would surpass the tax-free allowance, triggering tax obligations. Reeves reiterated the exemption from tax payments for this Parliament term, contradicting the previous reassurance from the Chancellor.
Further details on the operational aspects of this tax exemption were not provided at that time. The triple lock mechanism ensures that the state pension rises annually in alignment with the highest increase among earnings growth from May to July, September inflation rates, or a minimum of 2.5%.
Wage growth between May and July, registering at 4.8%, was the determining factor for the state pension increase in April 2026.
