Rachel Reeves, during an interview with Martin Lewis, confirmed that individuals whose sole income is the state pension are 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) by April 2026.
This adjustment places the new state pension just below the £12,570 personal allowance threshold, which denotes the income level at which tax obligations commence. Concerns were raised by analysts that millions of pensioners solely reliant on the state pension might face tax liabilities when the pension increases again in April 2027.
The state pension escalates annually in accordance with the triple lock mechanism. Chancellor also assured that individuals receiving only the basic or new state pension will be exempt from paying minor tax amounts through Simple Assessment.
Although the new full state pension is close to the tax threshold, Rachel Reeves reiterated in an interview with Martin Lewis that those solely dependent on the state pension will not be taxed during this parliamentary term. However, beyond this period, no commitments have been made regarding tax obligations. Martin Lewis highlighted that from 2027, the full new state pension will surpass the tax-free allowance, making it subject to taxation.
The triple lock guarantees the annual state pension increase, using the highest figure among earnings growth from May to July, inflation in September, or a minimum of 2.5%. With the 4.8% wage growth during May to July, this percentage is being applied for the state pension rise in April 2026.