From April, pensioners can expect a financial boost with the New and Basic State Pensions set to increase by 4.1 percent, while other additional elements will receive a hike of 1.7 percent. Following the Triple Lock mechanism, these pensions are adjusted annually based on the highest value among May to July’s average earnings growth (4.1%), September’s CPI (1.7%), or a guaranteed 2.5 percent.
Contrary to rumours spreading on social media that HMRC has warned of a “£130 deduction to the monthly State Pension”, government-paid pension incomes will only increase from April. This is because Labour has pledged to maintain the Triple Lock for the next five years, while taking away support like the universal Winter Fuel Payment which is now income-restricted.
As for pensioners receiving the full New State Pension, currently valued at £11,502 for the tax year 2024/25, they’ll see an increase to £11,973 in the 2025/26 tax year. However, the Personal Allowance for tax is fixed at £12,570 up to and including the financial year 2028/29, which will leave many older Brits paying more tax on their retirement income.
This leaves a buffer of £1,068 beneath this year’s tax threshold, dwindling down to just £597 the following year for those receiving the higher rate pension. This means other incomes, such as private pensions, could face a higher tax liability – though you will still avoid paying tax on the State Pension.
Usually, these taxes are sorted out via PAYE for employment and private pension income, but as reported by the Daily Record, some may receive a summer tax bill from HMRC that must be settled by January.
There’s been considerable speculation about the number of pensioners who will be taxed, but currently, nearly 8 million (62%) of the 12.9 million State Pensioners in the UK already pay some tax in retirement, so this isn’t a new occurrence. With the 13th year of auto-enrolment in the workplace now in progress, more individuals are set to benefit from increased income in retirement and will likely pay tax – typically deducted from their private pension.
It’s important to remember that any tax paid in retirement is based on the amount of income earned above the threshold, not the total additional income. For example, 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.
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.
