Rachel Reeves confirmed during an interview with Martin Lewis that individuals whose sole source of income is the state pension will not be required to pay taxes. In the recent Budget announcement, the Chancellor disclosed a 4.8% increase in the state pension, bumping the full new state pension from £230.25 per week to £241.30 per week (£12,547.60 annually) starting April 2026.
This adjustment positions the state pension just under the £12,570 personal allowance threshold, which signifies the income limit 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 rises again in April 2027.
The state pension receives an annual increment aligned with the triple lock mechanism. Additionally, the Chancellor clarified that individuals solely receiving the basic or new state pension would be exempt from small tax payments through Simple Assessment.
The new full state pension amount hovers just below the £12,570 personal allowance, indicating its proximity to the taxable threshold. In response to queries from Martin Lewis, Rachel Reeves affirmed that individuals with only the state pension as income would not be taxed during this parliamentary term. However, she refrained from committing to future tax implications beyond the current term.
Martin Lewis highlighted that as of 2027, the full new state pension would surpass the tax-free allowance, necessitating tax payments. Although the Chancellor initially suggested no assessments would be required, Rachel Reeves stated on the show that no taxes would be levied during the current parliament period.
Further details on the operational aspects of this exemption were not immediately provided. The triple lock mechanism ensures that the state pension increases annually in line with the highest among earnings growth between May to July, inflation in September, or a minimum of 2.5%.
The surge in wage growth from May to July at 4.8% dictated the state pension increment for April 2026.