The Chancellor will announce any changes to the tax system at fiscal events in the usual way
The UK Government has pledged its commitment to “committed to supporting pensioners” and ensuring they have the “dignity and security they deserve in retirement”, following a query from Lib Dem MP Dr Al Pinkerton about the “potential merits of increasing the Personal Allowance” for those over State Pension age.
Earlier this year, it was confirmed by the Labour Government that the Personal Allowance will remain frozen at £12,570 until April 2028. With the Triple Lock guarantee, the full New State Pension will be worth £12,547 next year – just £23 shy of the income tax threshold, reports the Daily Record.
However, Treasury Minister Dan Tomlinson responded to the Surrey Heath MP’s written question by stating that the UK Government “keeps all taxes under review as part of the policy making process”. He added that any changes to the tax system would be announced by Chancellor Rachel Reeves “will announce any changes to the tax system at fiscal events in the usual way”.
The next fiscal event is the Autumn Budget, which is set to be announced in Parliament on November 26. The Treasury Minister elaborated: “Through our commitment to protect the Triple Lock, over 12 million pensioners benefitted from a 4.1 per cent increase to their Basic or New State Pension in April 2025.”
He further stated: “Over the course of this Parliament, the full yearly rate of the new State Pension is expected to increase by around £1,900 based on the Office for Budget Responsibility’s latest forecast.
“The Personal Allowance – the amount an individual can earn before paying tax – will continue to exceed the basic and full new State Pension in 2025/26. This means pensioners whose sole income is the full new State Pension or basic State Pension without any increments will not pay any income tax.”
The Triple Lock system ensures both the New and Basic State Pensions increase each year in line with the highest of three measures: average annual earnings growth from May to July (4.8%), the CPI inflation rate in the year to September (3.8%), or 2.5 per cent.
Additional State Pension elements and deferred State Pensions go up annually in line with the September CPI figure.
A 4.8 per cent increase would see those claiming the full New State Pension receive £241.30 weekly, while those on the maximum Basic State Pension would get £184.90 per week.
The Secretary of State for Work and Pensions (Pat McFadden) is legally required to carry out a yearly review of the State Pension and benefits, with findings set to be announced in November.
The expected 4.8 per cent boost means people claiming the full New State Pension could receive £241.30 weekly, or £965.20 every four-week payment period – totalling approximately £12,548 per year. Individuals receiving the full Basic State Pension could see their weekly payment rise to around £184.90, equating to £739.60 every four-week pay period – approximately £9,615 per year.
It’s important to remember that the amount of State Pension you receive depends on your National Insurance contributions. To qualify for the full New State Pension, you require roughly 35 years’ worth of contributions, though this may differ if you were ‘contracted out’.
The uprating will be a welcome boost for most pensioners, but it will mean more elderly people paying tax in retirement.
Claire Trott, Head of Advice at St James’s Place, said: “The UK CPI figures confirm that, as expected, next April’s State Pension rise will be determined by average earnings (which topped 4.8% in the three months to July), meaning pensioners are set for a substantial uplift of over £550 annually. However, this rise is something of a double-edged sword.
“While the boost will be welcomed by many, it also pushes the New State Pension to just below the personal Allowance, and risks nudging many more people into paying tax on any other additional income they have. As a result, someone with additional income of £10,000 will effectively only see an increase in their take home income of just shy of 2.3 per cent due to the additional taxation, which could result in unexpected tax bills for unassuming pensioners.”
Full New State Pension
- Weekly: £241.30 (from £230.25)
- Four-weekly pay period: £965.20
- Annual amount: £12,547
Full Basic State Pension
- Weekly: £184.90 (from £176.45)
- Four-weekly pay period: £739.60
- Annual amount: £9,614
State Pension and tax
Guidance on GOV.UK states: “You pay tax if your total annual income adds up to more than your Personal Allowance. Find out about your Personal Allowance and Income Tax rates.
Your total income could include:
- the State Pension you get – Basic or New State Pension
- Additional State Pension
- a private pension (workplace or personal) – you can take some of this tax-free
- earnings from employment or self-employment
- any taxable benefits you get
- any other income, such as money from investments, property or savings
Check if you have to pay tax on your pension
Before you can check, you will need to know:
- if you have a State Pension or a private pension
- how much State Pension and private pension income you will get this tax year (April 6 to April 5)
- the amount of any other taxable income you’ll get this tax year (for example, from employment or state benefits)
You cannot use this tool if you get:
- any foreign income
- Marriage Allowance
- Blind Person’s Allowance
Use this online tool at GOV.UK to check if you have to pay tax on your pension. The full guide to tax when you get a pension can be found on GOV.UK here.