Rachel Reeves, in a discussion with Martin Lewis, confirmed that individuals relying solely on the state pension will not be required to pay taxes. The Chancellor’s Budget announcement included a 4.8% increase in the state pension, raising it from £230.25 per week to £241.30 per week (equivalent to £12,547.60 annually) by April 2026.
This adjustment places the state pension just under the £12,570 personal allowance threshold, the limit before tax obligations commence. Concerns were raised by analysts regarding potential tax liabilities for millions of pensioners dependent solely on the state pension when it increases again in April 2027.
Annual state pension increments are determined by the triple lock mechanism. The Chancellor specified that individuals solely receiving the basic or new state pension will be exempt from paying taxes through Simple Assessment.
Although the new full state pension is in close proximity to the tax threshold, Rachel Reeves assured in an interview with Martin Lewis that taxes will not apply as long as the state pension remains the sole income source during this parliamentary term. From 2027 onwards, tax liability may arise when the full new state pension surpasses the tax-free allowance.
Further details on the tax exemption process for state pension recipients were not disclosed at that time. The triple lock ensures state pension adjustments annually based on the highest value among earnings growth from May to July, inflation in September, or a minimum of 2.5%.
The recent 4.8% wage growth from May to July determined the state pension increase for April 2026.