For years, the full State Pension has sat just below the point where income tax starts. From April 2027, that changes. The new State Pension is set to rise above the tax-free Personal Allowance for the first time.
The government has promised that pensioners living only on the State Pension won’t pay income tax. But it hasn’t said how. Chancellor John Healey delivers his first Budget on Wednesday, October 28, and that’s where the details are expected.
Here’s what we know, what’s still unclear, and what to watch for.
The problem in two numbers
- £13,036: the expected full new State Pension from April 2027, after a 3.9% triple lock rise
- £12,570: the Personal Allowance, the amount you can earn before paying income tax. It’s been frozen since 2021 and is due to stay frozen until 2031.
The gap is £466. At the 20% basic rate, someone with only the full new State Pension would owe about £93 a year in tax if nothing changed. It’s a small sum, but it would bring a large number of pensioners into the tax system for the first time, many of whom have never filled in a tax return.
The full basic State Pension, for people who reached pension age before April 2016, is due to rise to about £9,990. That’s still well under the allowance.
What the government has promised
The government’s pledge is that “pensioners whose only income is the full new or basic state pension without any increments will not pay income tax.” Pensions Minister Torsten Bell has repeated it.
What isn’t known yet is the method. The two main options being discussed are:
- a higher tax-free allowance just for low-income pensioners, at about £13,036. Yahoo Finance reported that Healey is expected to go this way, shielding close to a million pensioners
- exempting State Pension income from tax in certain cases
Until the Budget speech, these are reports and possibilities, not confirmed policy.
The questions still hanging
The wording of the pledge leaves some important gaps that the Budget needs to fill:
- “Without any increments”: What about people who get a bit extra, for example from deferring their pension or from old-style additional State Pension? Many pensioners get slightly more than the flat rate, and it’s not clear if they’re covered.
- Small private pensions: Someone with the State Pension plus a small workplace pension was already likely to pay some tax. That isn’t expected to change.
- Savings income and ISAs: It’s unclear whether other income, including tax-free income, affects who gets the protection.
- How it’s collected: Will people need to do anything, or will HMRC handle it automatically?
Other Budget items pensioners are watching
- The triple lock: The government plans to change how the earnings part is measured from April 2030. The Budget may give more detail.
- Pensions and inheritance tax: Unused pension pots are due to count for inheritance tax from April 2027, and more detail may follow.
- The State Pension rise: The 3.9% increase from April 2027 is expected to be confirmed. Official rates usually follow in November.
On benefits more widely, reports suggest bigger changes to disability benefits may come after the Budget rather than in it. Prime Minister Andy Burnham has said he won’t pursue “crude cuts.”
What to do now
Nothing yet. The tax change wouldn’t start until April 2027 at the earliest, and no one needs to contact HMRC now. We’ll update this article as soon as the Budget confirms the details.
Sources: interactive investor (October 22, 2026), Yahoo Finance UK (October 26, 2026) and PensionBee.
Maria is a dedicated news writer covering the latest UK updates on DWP, PIP, State Pension Triple Lock, Child Benefit, Universal Credit, and driving licence regulations. She focuses on explaining government announcements, benefit eligibility, payment changes, pension increases, and new regulations in a clear and easy-to-understand way.