From April, the New and Basic State Pensions are set to see a 4.1 per cent rise while additional elements will see an increase of 1.7 per cent. Adhering to the Triple Lock, the New and Basic State Pensions ascend annually by either the highest of May to July’s average earnings growth (4.1%), September’s CPI (1.7%), or a fixed 2.5 per cent.
Contrary to recent claims on social media, there is no impending “£130 deduction to the monthly State Pension” as purportedly warned by HMRC. The Labour Government has made commitments to uphold the Triple Lock for another five-year span, which could be stirring some confusion.
As for the Personal Allowance, it’s to remain static at £12,570 until the 2028/29 fiscal year begins. With the full New State Pension currently pegged at £11,502 for the tax year 2024/25, expect an increment to £11,973 come the 2025/26 tax year.
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This scenario sketches out a remaining £1,068 before this year’s tax threshold is surpassed, with the figure tapering to £597 the following year.
Older people with only the State Pension as their source of income will not pay income tax
(Image: Getty)
It’s crucial to note that those receiving the full New State Pension won’t encounter income tax charges. However, seniors drawing additional income through employment, private, or workplace pensions might face tax obligations, reports the Daily Record.
Taxes for most are settled via PAYE for employment and private pension taxation, while others not paying taxes automatically will receive a subsequent summer tax bill from HMRC to settle by the ensuing January.
There’s been a fair amount of conjecture about the number of pensioners who will be taxed, but as it stands, nearly 8 million (62%) of the 12.9 million State Pensioners across the UK already pay some tax in retirement, so this isn’t a new phenomenon.
With the 13th year of auto-enrolment in the workplace underway, more individuals are set to benefit from increased income in retirement and will likely pay tax – typically deducted from their private pension.
Frozen personal tax allowance thresholds are pushing pensioners with other incomes into paying tax
It’s crucial to note that any tax paid in retirement is based on the amount of income earned above the threshold, not the total additional income. For instance, if someone has a total annual income of £13,000, they will pay tax on £430 – the amount above the £12,570 threshold.
Those affected would then have to pay HMRC 20 per cent of their income above the threshold, which is the starter rate of tax.
Income rates and bands – England
- £12,571 to £50,270 – 20 per cent
- £50,271 to £125,140 – 40 per cent
- over £125,140 – 45 per cent
State Pension payments 2025/26
The DWP will publish the full list of State Pension and benefit uprated payments shortly, so far they have only confirmed the New and Basic State Pension rates, not additional elements (which are rising by 1.7%).
Full New State Pension
- Weekly payment: £230.25 (from £221.20)
- Four-weekly payment: £921 (from £884.80)
- Annual amount: £11,973 (from £11,502)
Full Basic State Pension
- Weekly payment: £176.45 (from £169.50)
- Four-weekly payment: £705.80 (from £678)
- Annual amount: £9,175 (from £8,814)
To check your own future State Pension payments, use the online forecasting tool on GOV.UK here.