Rachel Reeves stated in an interview with Martin Lewis that individuals relying solely on the state pension as their income will not be subject to tax. The Chancellor, in the Budget announcement, confirmed 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 below the personal allowance threshold of £12,570, the limit before tax obligations commence. Concerns were raised by analysts that with future increases, many pensioners dependent only on the state pension might face tax liabilities starting in April 2027.
Under the triple lock policy, the state pension experiences annual increments. The Chancellor also assured that individuals solely receiving the basic or new state pension will be exempt from paying small tax amounts via Simple Assessment.
Despite the proximity of the new full state pension to the tax-free threshold, Reeves confirmed in discussion with Martin Lewis that no tax will be levied during this parliamentary term. However, beyond the current term, no commitments were made regarding tax obligations. Martin Lewis highlighted that from 2027, tax will be due on the full new state pension exceeding the tax-free allowance.
Further details on the tax exemption process for state pension recipients were not immediately provided. The triple lock mechanism ensures that the state pension rises annually based on the highest of earnings growth between May and July, September’s inflation rate, or 2.5%. With the highest wage growth recorded from May to July at 4.8%, this figure determines the state pension increase for April 2026.