Rachel Reeves, in an interview with Martin Lewis, clarified that individuals relying solely on the state pension as their income would not be subject to tax. The Chancellor’s Budget announcement confirmed a 4.8% increase in the state pension, raising the full new state pension from £230.25 per week to £241.30 per week (£12,547.60 annually) by April 2026.

This adjustment places the state pension just under the £12,570 personal allowance threshold, which is the amount one can earn in a tax year before tax obligations kick in. Concerns were raised by analysts about the potential tax implications for millions of pensioners dependent solely on the state pension as it rises again in April 2027.

The state pension undergoes annual increases in line with the triple lock mechanism. The Chancellor also assured that individuals exclusively receiving the basic or new state pension would be exempt from paying small tax amounts through Simple Assessment.

Despite the state pension nearing the tax threshold, Rachel Reeves emphasized in the interview that individuals with the state pension as their sole income would not be taxed during this Parliament. However, beyond the current term, no firm commitments were made regarding tax obligations. Martin Lewis pointed out that from 2027, tax would be due on the full new state pension as it surpasses the tax-free allowance.

The triple lock ensures annual state pension adjustments based on the highest percentage increase among earnings growth between May and July, September inflation rates, or a minimum of 2.5%. With the wage growth for May to July recorded at 4.8%, this figure determines the state pension increase for April 2026. Additional details on the tax exemption process for state pension recipients were not disclosed at the time.