The New and Basic State Pensions are poised for a 4.1% boost from April next year, with additional elements set for a 1.7% hike, in line with the Triple Lock mechanism. This guarantees annual increases based on the highest of three figures: average earnings growth (4.1%), CPI (1.7%), or 2.5%.
Despite this, a misleading video on social media has been circulating, wrongly asserting that HM Revenue and Customs (HMRC) has alerted pensioners to a “£130 deduction to the monthly State Pension”. The Labour Government has pledged to uphold the Triple Lock for another five years.
The government has also said the Personal Allowance will remain at £12,570 until the start of the 2028/29 fiscal year. The full New State Pension, which is currently £11,502 for the 2024/25 tax year, is set to climb to £11,973 in 2025/26.
This leaves a narrow margin of just £1,068 under the tax threshold for the current year and even less, at £597, for 2025/26. It’s essential to note that full New State Pension recipients are exempt from income tax, but those with extra income from employment or private or workplace pensions may be liable for taxation.
For the majority, taxes will be automatically subtracted via PAYE for employment and on private pensions. However, individuals who do not pay tax through these means will receive a tax bill from HMRC the following summer, which must be settled by January of the next year, as reported by the Daily Record.
There has been considerable speculation regarding the number of pensioners who will be liable for tax. However, it’s important to note that out of the 12.7 million State Pensioners in the UK, nearly 8 million (62%) already pay some form of tax during their retirement.
This is not a new occurrence. With the 12th year of auto-enrolment in workplaces under way, more individuals are set to benefit from increased income during retirement and will likely pay tax, typically deducted from their private pension.
Any tax paid in retirement is based on the amount of income earned above the threshold, not the total additional income. For example, if an individual has a total annual income of £13,000, they will pay tax on £430 – the amount above the £12,570 threshold.
Income rates and bands – England
- £12,571 to £50,270 – 20%
- £50,271 to £125,140 – 40%
- over £125,140 – 45%
State Pension payments 2025/26
The DWP will soon publish the full list of State Pension and benefit uprated payments. So far, they have only confirmed the New and Basic State Pension rates, not additional elements (which are rising by 1.7%). To check your own future State Pension payments, use the online forecasting tool on GOV.UK.
