Overview
- Chancellor Rachel Reeves confirmed that people whose sole income is the state pension will not pay income tax or be required to file tax returns during the current Parliament.
- The full new state pension is set to rise 4.8% next April to £241.30 a week (£12,547.60 a year), leaving it roughly £22 below the £12,570 personal allowance.
- With tax thresholds frozen, Reeves acknowledged projections that the state pension will overtake the personal allowance around April 2027 unless policy changes.
- Officials are working on a "simple workaround," and tax advisers expect HMRC to avoid issuing returns or small assessments for tiny liabilities, while PAYE continues to apply for pensioners with other pensions.
- A Centre for Policy Studies analysis says frozen thresholds will leave many workers worse off in real terms by 2030–31, while pensioners gain from the triple lock, highlighting the broader effects of fiscal drag.