Older basic state pensioners who receive additional pension payments from the Department for Work and Pensions (DWP) will not be eligible for the tax-free exemption announced by Chancellor John Healey, even if they have no other income. HM Treasury confirmed the exclusion earlier this summer.
The exemption, first promised by former Chancellor Rachel Reeves in 2025, was designed to stop state pensioners who rely solely on DWP income from paying tax on their pension payments. The measure follows concerns that the full new state pension would rise above the annual £12,570 Personal Allowance threshold from April 2027, when triple lock increases take effect. The full new state pension for a pensioner with a maximised National Insurance record is now confirmed at £13,036.
Who Is Excluded From the Allowance
HM Treasury has confirmed that for older basic state pensioners, the exemption will only apply to those who do not have any 'increments', such as the additional pension schemes. This means basic state pensioners with additional pension payments from the DWP will not be allowed to get an exemption on their tax bills, even if they have no other non-DWP income, like private pensions or work.
The additional state pension is an extra amount of money paid on top of the basic state pension for a man born before April 6, 1951, or a woman born before April 6, 1953, unless they were 'contracted out' by their employer. There is no fixed amount for the additional state pension, as it is made up of three schemes: the State Second Pension, which ran from 2002 to 2016, the State Earnings Related Pension Scheme (SERPS) from 1978 to 2002, and state pension top up, which ran from October 2015 to April 2017.
Payment Levels and Treasury Response
From April 6, 2026, additional pension payments increased to a maximum of £230.54 per week, up from £222.10, paid on top of the £184.90 basic state pension. Although the additional pension figures are yet to be confirmed in today's Budget, they are expected to be uprated again next April as normal.
An HM 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."
