The HM Revenue & Customs (HMRC) has issued new tax rules for Britons who choose to continue working after reaching State Pension age. These rules are part of the Tax Confident campaign, launched in March, which aims to explain tax in simple terms. The guidance comes as the State Pension age rises from 66 to 67 between April 2026 and March 2028.
National Insurance Changes for Employees and Self-Employed
If you are employed and reach State Pension age, your employer will stop deducting National Insurance from your wages. To prove your age, you can show your employer your passport, birth certificate, or State Pension award letter. Alternatively, you can ask HMRC to send your employer a letter confirming you have reached State Pension age.
For self-employed individuals, you will stop paying all National Insurance contributions from the start of the tax year (April 6) following the date you reach State Pension age. You should ensure your date of birth is on your tax return so HMRC can stop your contributions correctly.
Income Tax and Personal Allowance
Despite the National Insurance changes, you will still need to pay Income Tax. Most people have a tax-free Personal Allowance – the amount you can earn each year before paying tax. The current Personal Allowance is £12,570 a year. If your total income from work and pensions is below this amount, you won't pay any Income Tax.
If your income exceeds this threshold, tax is payable on your total income. Your State Pension is always paid without tax deducted; it is added to any other income to determine if you exceed your Personal Allowance. If you do, you only pay tax on the amount above the allowance.
How Tax is Collected
If you are employed, tax is usually collected through Pay As You Earn (PAYE). HMRC provides your employer with a tax code, which is used to calculate how much tax to deduct from your wages. Your tax code, shown on your payslip, is based on your Personal Allowance and any other income, including your State Pension.
If you receive a workplace or private pension along with wages, HMRC will typically adjust your tax code to ensure the correct tax is collected by both your employer and pension provider. In most cases, no action is needed.
For self-employed individuals, you must include all sources of income, including workplace or private pensions, on your tax return. Any tax owed can then be paid directly to HMRC.
