The State Pension is set to rise again in April 2026, but this good news comes with a catch. Thanks to the triple lock policy, pensioners will see their payments jump by 4.8%, pushing the full new State Pension up to £12,548 a year. But here’s the kicker – that’s just £22 below the personal tax allowance. And with the tax threshold frozen, millions more retirees could start paying income tax for the first time.
Let’s unpack what this all means – and why this tiny £22 gap is triggering such a big reaction.
Rise
So, what’s actually happening? From April 2026, the full new State Pension will go up to £12,548 annually – that’s £241.30 per week. If you’re on the older full basic State Pension, your weekly payout will be £184.90. This increase is driven by the triple lock – the policy that ensures the State Pension rises by the highest of inflation, average earnings, or 2.5%.
Seems like a win, right? More money in your pocket.
But here’s where it gets tricky. The personal income tax allowance – the amount you can earn before paying tax – is frozen at £12,570 until at least 2029/30. That leaves just £22 of tax-free headroom in 2026. By 2027, State Pension alone will push people over the limit.
Squeeze
The problem? The government isn’t budging on tax thresholds, even as pension income rises. This creates what’s known as a “stealth tax.” It doesn’t look like a tax hike, but it gradually pulls more people into the tax net as incomes rise and thresholds stay put.
Right now, around 8.5 million pensioners already pay income tax. But that number is expected to grow significantly over the next few years. Analysts believe hundreds of thousands – possibly millions – will be pulled into the tax system purely because of this rise in the State Pension.
That’s frustrating for many retirees, especially those who were under the impression their pensions would be tax-free.
Burden
For pensioners who only receive the State Pension, this tax might come as an unpleasant surprise. They may find themselves receiving a tax bill from HMRC via something called a “Simple Assessment.” That’s a one-off notice telling you how much tax you owe and how to pay it – not exactly a stress-free process for older people unfamiliar with self-assessment.
And if you also have a private pension, rental income, or other savings, things get even more complex. You may need to fill out a self-assessment tax return. For many, that’s a daunting process, especially if they’ve never done it before.
So yes, pensioners may see a bigger cheque from the government – but it could be followed by an equally unwelcome letter from HMRC.
Freeze
The tax-free personal allowance has been stuck at £12,570 since 2021, and will now remain frozen until 2031. That’s almost a full decade of no increase – even as the cost of living, wages, and pensions continue to rise.
So while the triple lock gives with one hand, the freeze on allowances quietly takes away with the other. It’s the textbook definition of a stealth tax.
And it’s not just about the State Pension. Dividend tax is also going up by 2% from next April. For retirees who supplement their income through investments, this means their total tax burden will climb even higher.
Reality
Here’s another reality check: not everyone actually receives the full State Pension. According to data, only about 36% of pensioners – roughly 4.7 million people – qualify for the full new amount.
Older pensioners, especially those who retired before 2016, often receive less. So while headlines talk about a £12,548 State Pension, many people get far less – but they still might find themselves on the tax hook if they have other sources of income.
Here’s a breakdown:
| Pension Type | Weekly Payment (2026) | Annual Amount |
|---|---|---|
| Full New State Pension | £241.30 | £12,548 |
| Full Basic State Pension | £184.90 | £9,614 |
| Personal Tax Allowance | – | £12,570 |
As you can see, even with just the State Pension, you’re bumping against that tax line.
Worries
So what’s the government doing about all this? According to officials, they’re looking at ways to ease the tax burden for those whose only income is the State Pension. There’s talk of automating the tax process or simplifying it to avoid making people complete full tax returns.
But until those changes happen, it’s on pensioners to stay alert. That means checking your total income, watching for letters from HMRC, and possibly seeking advice if you’re unsure whether you’ll owe tax.
Because with the State Pension about to cross the income tax line, many retirees could get caught off guard.
Even though no one likes paying more tax, it’s important to remember this isn’t a penalty – it’s just the outcome of frozen thresholds and rising benefits colliding. Still, that doesn’t make it feel any less frustrating for those affected.
If you’re nearing retirement, or already retired, now is a good time to check your numbers. Are you close to the £12,570 threshold? Do you have other income streams? And would a small increase push you into tax territory?
Being prepared might not avoid the tax, but it could help you manage the stress when the HMRC letter drops through your door.
FAQs
Will all pensioners pay tax from 2027?
No, only those with income over £12,570 will pay income tax.
Is the personal allowance frozen?
Yes, it’s frozen at £12,570 until 2029/30.
What is the new State Pension for 2026?
It’s £12,548 per year or £241.30 weekly.
Do I need to file a tax return?
Only if you have other income or HMRC sends a Simple Assessment.
What is a Simple Assessment?
It’s a tax bill from HMRC for those who owe tax but don’t use PAYE.
