Rachel Reeves, during a conversation with Martin Lewis, has reaffirmed that individuals relying solely on the state pension as their income will be exempt from paying taxes. The Chancellor announced in the Budget that the state pension will see a 4.8% increase, raising the full new state pension from £230.25 per week to £241.30 per week (£12,547.60 annually) starting in April 2026.
This adjustment places the state pension just under the £12,570 personal allowance, which serves as the threshold for tax obligations. Concerns were raised by analysts regarding the potential tax implications for millions of pensioners who solely depend on the state pension, especially when the pension rises again in April 2027.
The state pension undergoes annual increments aligned with the triple lock mechanism. The Chancellor clarified that individuals receiving only the basic or new state pension will be spared from paying taxes through Simple Assessment.
Despite the state pension being close to the tax threshold, Chancellor’s confirmation with Martin Lewis ensures that those with only the state pension as income will remain tax-exempt for the current parliamentary term. Beyond that, no commitments were made for future tax liabilities. Martin Lewis highlighted that from 2027, the full new state pension would surpass the tax-free allowance, triggering tax liabilities.
The Chancellor’s assurance that assessments won’t be necessary for tax payments contradicted Rachel Reeves’ statement that no taxes would be levied during this parliamentary session. Further details on the tax exemption process for state pensioners were not disclosed at that time.
The triple lock provision guarantees that the state pension escalates annually in accordance with the highest of earnings growth between May to July, September inflation rate, or a minimum of 2.5%. With the highest wage growth recorded at 4.8% for May to July, this figure is utilized to determine the state pension hike for April 2026.