State Pensioners to Avoid Tax Bills Despite Rising Income Thresholds

State pensioners are being reassured they will not face income tax bills as their state pension rises, despite some “edge cases” potentially falling within HMRC’s remit. The state pension is scheduled to increase by 4.8% in April 2026, which will raise the annual amount to £12,547.60 — just shy of the current personal allowance threshold of £12,570.

Martin Lewis, a well-known financial expert, shared on X (formerly Twitter) that Chancellor Rachel Reeves has confirmed that pensioners whose sole income is the state pension will not be required to pay income tax during this parliamentary session. This means no self-assessment tax returns or tax payments will be necessary for these individuals.

The pension triple lock guarantees that the state pension will increase by at least 2.5% each year, so by 2027, those reliant only on the full new state pension could earn above the personal allowance limit and potentially become liable for income tax. However, Chancellor Reeves has committed to finding a simple solution to prevent pensioners, especially those with minor additional income, from having to navigate complex tax returns or pay small amounts of tax.

Lewis highlighted concerns from the public, such as the case of an 85-year-old man with dementia whose state pension might push his income over the personal allowance. Reeves clarified that as long as a pensioner receives no other pension income, they will not have to file tax returns or pay tax during this Parliament. While she did not extend the same guarantee to those with minor supplementary income, work is underway to address these edge cases.

This reassurance offers clarity following the recent budget announcements, which only mentioned that pensioners would be exempt from self-assessments, without guaranteeing that tax payments would be waived. Now, pensioners can feel more confident that rising pensions will not translate into immediate tax liabilities.