Rachel Reeves, in a conversation with Martin Lewis, has affirmed that individuals whose sole income is the state pension will not be required to pay taxes. The Chancellor, in the Budget announcement, stated that the state pension will see a 4.8% increase. This raise will elevate the full new state pension from £230.25 weekly to £241.30 weekly (£12,547.60 annually) by April 2026, positioning it slightly below the £12,570 personal allowance threshold for tax payments.
This adjustment had raised concerns among analysts regarding potential tax implications for millions of pensioners reliant solely on the state pension, especially with the projection of another increase in April 2027. The annual increase in the state pension, following the triple lock mechanism, aligns with the Chancellor’s assurance that individuals exclusively receiving the basic or new state pension will be exempt from small tax payments through Simple Assessment.
Despite the proximity of the new full state pension to the tax threshold, Rachel Reeves reiterated in an interview with Martin Lewis that no tax obligations will arise on the state pension as the current Parliament progresses. However, looking ahead, no commitments have been made beyond the current term. Martin Lewis highlighted that post-2027, tax liability will apply as the full new state pension surpasses the tax-free allowance. Reeves further emphasized that the specifics of this exemption process remain under consideration without detailed disclosure at present.
Under the triple lock system, the state pension escalation each April corresponds to the highest growth rate among earnings between May to July, September’s inflation, or a minimum of 2.5%. With the highest wage growth recorded between May to July at 4.8%, this figure dictates the state pension increment for April 2026.