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UK Pensioners Face Tax Risk as State Pension Nears Personal Allowance Threshold

Experts warn that rising state pensions under the triple lock could trigger tax liabilities, benefit losses, and administrative burdens for retirees.

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Overview

  • The full new state pension increased by 4.1% this April to £11,973 annually, leaving only a £600 gap below the £12,570 personal allowance threshold.
  • The personal allowance, frozen since 2021 and set to remain so until 2028, creates fiscal pressure as pension increases approach taxable levels.
  • If the state pension surpasses the tax-free threshold, pensioners could face income tax liabilities and lose access to critical benefits like Pension Credit, potentially forfeiting over £8,000 in annual support.
  • Pensioners with no other taxed income may need to file complex self-assessment tax returns, which experts warn could cost more than the pension increase itself.
  • The Conservative Party previously proposed a 'triple lock plus' mechanism to align pensioners' personal allowance with the triple lock increases, but no action has been taken on this plan.