The state pension is set to rise by 4.7% in April, but the increase will push millions of pensioners into paying income tax for the first time
Millions face being dragged into paying income tax on their state pension alone for the first time – as frozen tax thresholds collide with the latest triple lock rise.
The squeeze comes because the Conservative Government froze the personal allowance before people pay tax in 2021.
The figure was locked in at £12,570 until 2028 under a policy that was subsequently adopted by Rachel Reeves. The April 2026 increase in the state pension is driven by the government’s triple lock formula which guarantees pensions rise by the highest of inflation, wage growth or 2.5%.
This formula means the full new state pension is set to increase by £561.60 a year from April, taking the annual payout to £12,534.60 – just £35 short of the tax free allowance.
The increase means that anyone with even a small private pension will start paying income tax from April. And experts warn that by 2027, the triple lock will push the new State Pension to at least £12,850, which would automatically attract tax on income above the £12,534 threshold.
Former pensions minister Steve Webb, now a partner at consultants LCP, said: “The standard rate of the new state pension is creeping ever closer to the frozen personal tax allowance.
“Indeed, we know for certain that someone who has no other income aside from the new state pension will be a taxpayer come April 2027.
“It is already the case that nearly three quarters of all pensioners pay income tax, and the ongoing freeze in tax thresholds coupled with steady rises in the pension will drag more and more into the tax net.”
The shift is stark. In 2021-22 the new state pension stood at just 74% of the income tax threshold, meaning pensioners had significant breathing room. But the freeze has turned what was a safety net into what critics describe as a stealth tax trap.
Although the triple lock offers protection against rising prices, campaigners warn that inflation combined with frozen thresholds means much of each year’s increase will be swallowed by tax.
Kevin Mountford, co-founder of Raisin UK, warned: “For some it will feel like the benefit is being clawed back” as more pensioners are tipped over the tax line. It is essential for people to plan ahead, be aware of how tax thresholds affect them.”
Claire Trott, head of advice at wealth manager St. James’s Place, said many will be surprised at how little of the rise in the State Pension they actually get to keep.
She said: “Someone with other income (on top of their state pension) of £10,000 will effectively only see an increase in their take-home income of 2.25% cent due to the additional taxation, which could result in unexpected tax bills for unassuming pensioners.”