All state pensioners will have to start paying Income Tax on a specific date due to Triple Lock changes which increase the amount everyone on the state pension will get.
Every year, the government is mandated to increase the amount it pays out in pensions thanks to an apparatus known as the Triple Lock.
This means that the state pension payouts must be increased in line with one of three metrics: wage growth, inflation, or a flat 2.5 percent, whichever of these three is highest.
The figures are set in September for the following April tax year and although the final numbers are yet to be fixed, it is looking increasingly likely that wage growth will be the determinant for next year’s state pension triple lock rise.
State pensioners could be due an uplift of £517 a year if current wage growth inflation rates are to remain the same next month, experts have said.
It means that the state pension will pay out a total of £12,019 per year from April 6, 2025.
The current tax threshold is £12,570, so state pensioners who have no other income will just sneak under the threshold on income tax in 2025.
Technically, pensioners already pay tax today, but you would need other earnings, such as a job, a workplace pension withdrawal or savings interest, to tip you over the threshold.
But in 2026 it will likely become a problem for even those without other incomes. Another £517 rise in 2025 would put the state pension to £12,587 from April 6, 2026.
Although the tax would be extremely low – 20 percent of every pound above £12,570 would be £3.40 – it would mark the first time a pensioner with no other income would be liable to pay some income tax on their state pension, and if the amount of increase was higher, it would increase that tax bill.
Then from April 2027 the amount of tax would be higher still.
One solution would be to increase the Personal Allowance threshold, which has been frozen for years, but Labour has pledged to keep tax thresholds frozen until 2028 – a position it may have to revise sooner if it wants to avoid headlines about pensioners being taxed.
