The Treasury has said the UK Government is committed to making sure older people whose only income is the State Pension will not pay income tax. Nearly 10 million people over State Pension age are expected to be paying income tax next year, according to the latest estimates from HM Revenue and Customs (HMRC).
The tax authority forecasts there will be 9.58m income tax payers over State Pension age in the 2026-27 tax year. This is because the Personal Allowance - the amount people can earn before paying Income Tax - will remain frozen at £12,570 until April 2031.
Government Commitment to Pensioners
However, a Treasury spokesperson has confirmed the UK Government is committed to ensuring anyone whose only income is the State Pension will not pay income tax. This commitment, first reported by the i Paper, will see the new Chancellor John Healey stick to his predecessor’s pledge.
A Treasury spokesperson said: “Anyone whose only income is the full new or basic State Pension without any increments will not pay income tax and we are committed to that over this Parliament. By keeping the Triple Lock, 12 million pensioners will see their income rise by up to £470 this year, and they continue to benefit from the highest Personal Allowance in the G7.”
The full New State Pension is currently worth £12,548 over the 2026-27 tax year - just £22 below the £12,570 Personal Allowance.
Why Many Pensioners Still Pay Tax
Many people may not realise the State Pension is taxable, particularly as tax is not deducted before payments are made. Whether you pay Income Tax depends on your total taxable income for the tax year, rather than your State Pension alone. This means many pensioners only start paying Income Tax if they also receive income from a workplace pension, private pension or employment.
Financial experts say the combination of frozen tax thresholds, annual increases to the State Pension under the Triple Lock and rising private pension incomes means more retirees are seeing their total taxable income exceed the Personal Allowance.
David Brooks, Head of Policy at financial services consultancy Broadstone, said: "The State Pension remains the bedrock of retirement income for many pensioners and is a vital protection against poverty in later life. As the value of the State Pension continues to increase, it is inevitable that more pensioners will pay Income Tax. While this may feel unfair to some retirees whose income comes largely from the State Pension, taxation is increasingly becoming the most cost-effective way for the government to distinguish between those with more and less retirement income while preserving the universal nature of the State Pension."
