Tax consequences of the rise in State Pension from 6th April 2027

From April 2027, increases to the State Pension are expected to push it above the tax-free Personal Allowance. As a result, some pensioners who rely solely on the State Pension may, for the first time, find themselves within the scope of income tax.

The Government has indicated that it intends to prevent this outcome, at least for the duration of the current parliament. However, with limited detail on how this will operate in practice, there remains uncertainty around who will be affected and how the rules will be applied.

Example for the year ended 5 April 2028

What might change and how?

The Government has announced, as part of the November 2025 Budget, that pensioners whose only source of income is the Basic or New State Pension will not have to pay income tax on this – at least until the end of the current parliament (which is due to be July 2029)

These changes are likely to be written into the next Finance Bill in the Autumn of 2026 but no detail on how this will work in practice has been published so far.  The proposed legislation would need to be well-written in order to take account of e.g. pensioners with less than full qualifying years, deferred lump sums, pension credits and to clarify whether receipt of other tax-free income eg property/trading allowance, dividends, personal savings allowance will affect whether they still receive actual State Pension received has been fairly taxed for all.

What to do next

If you would like to understand how these changes could affect your position, or want clarity on how your income may be taxed in the coming years, speak to our private client team. They can help you plan ahead and make informed decisions based on your wider financial position.