Rachel Reeves, during an interview with Martin Lewis, confirmed that individuals whose sole income is from the state pension will not be liable to pay tax. 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 per year) by April 2026.
This adjustment places the state pension just below the £12,570 personal allowance threshold, which is the income amount one can earn annually before tax obligations kick in. Concerns were raised by analysts that millions of pensioners relying solely on the state pension could face tax liabilities as the pension rises in April 2027.
The state pension undergoes annual increases following the triple lock mechanism. The Chancellor also announced that individuals receiving only the basic or new state pension will be exempt from paying tax through Simple Assessment.
Although the new full state pension is close to the tax threshold, Rachel Reeves assured during the interview with Martin Lewis that no tax payments will be required in this Parliament. However, beyond the current term, no commitments have been made. Martin Lewis noted that from 2027, tax will be due on the full new state pension as it surpasses the tax-free allowance.
The triple lock ensures that the state pension adjusts each April based on the highest of earnings growth between May to July, inflation in September, or a minimum of 2.5%. Wage growth for May to July at 4.8% determined the state pension increase for April 2026. Further details on the tax exemption process for state pension recipients were not provided at the time.
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