{"id":241824,"date":"2026-01-16T20:06:10","date_gmt":"2026-01-16T20:06:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/il\/241824\/"},"modified":"2026-01-16T20:06:10","modified_gmt":"2026-01-16T20:06:10","slug":"hmrc-working-to-stop-state-pensioners-getting-dragged-into-tax-changes","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/il\/241824\/","title":{"rendered":"HMRC ‘working’ to stop state pensioners getting dragged into tax changes"},"content":{"rendered":"

HMRC has confirmed it is \u201cworking\u201d with the Treasury to ensure pensioners will be exempt from paying income tax<\/a> on their state pension if their payments exceed the personal allowance threshold.<\/p>\n

Officials from the tax authority confirmed this week that the one million people who are exclusively paid the state pension without any private pension pots will be spared paying 20% basic rate tax on their fund.<\/p>\n

In November\u2019s budget, Rachel Reeves announced she was extending the freeze on the personal tax threshold at which people start to pay income tax for a further three years, up to April 2031.<\/p>\n

The move sparked concern that this would likely drag at least 500,000 pensioners above the threshold<\/a>. In April, the state pension will increase by more than \u00a3500 to \u00a312,547.60, just short of the \u00a312,570 personal allowance. It would almost certainly go above the threshold the following year – meaning swathes of pensioners would have to fill out a tax return.<\/p>\n

Reeves faced initial criticism, but subsequently clarified that anyone only in receipt of the state pension would not have to pay any tax \u201cin this parliament\u201d.<\/p>\n

What dates will the protections come into place?<\/p>\n

The \u2018personal allowance\u2019 is the amount of income you can earn each tax year before you start paying income tax.<\/p>\n

With the income tax freeze set to push state pensioners into the next tax bracket from the next financial year, it\u2019s clear the government needs to act quickly to ensure it can keep its promise to spare state pensioners an unexpected tax bill.<\/p>\n

\"London,<\/p>\n

Reeves confirmed the freeze in the budget (Alamy)<\/p>\n

(SOPA Images, SOPA Images Limited)<\/p>\n

Speaking to the Treasury select committee on Tuesday 13 January, HMRC director Cerys McDonald confirmed that the policy to protect pensioners from taxation would be enshrined in the next Finance Bill, which is due after the Chancellor\u2019s 2026 Budget.<\/p>\n

This will ensure that the process is in place before the threshold hits state pensioners in April 2027.<\/p>\n

\u201cI can reassure the committee that we are working hand-in-glove with the Treasury on these options to make sure that the final decision is operable from April 2027,\u201d McDonald said, adding that \u201cwe are working through the options with her now.\u201d<\/p>\n

McDonald confirmed that she \u201cdoes not expect there to be any customer requirement here or to apply for this. We should be able to automate it.\u201d<\/p>\n

\"HMRC<\/p>\n

HMRC confirmed the changes will be in place before the 2027 financial year<\/p>\n

\u201cFurther detail will be set out in due course,\u201d she added.<\/p>\n

Will pensioners have to pay tax on their state pension?<\/p>\n

On 27 November, Reeves confirmed that pensioners whose sole income in retirement is the state pension won’t have to pay tax if it exceeds the allowance.<\/p>\n

However, this relief doesn’t extend to those with private pensions.<\/p>\n

Technically, those who are \u201cdependent on the state pension are quite likely to be liable to pay income tax by 2027,\u201d Lily Megson-Harvey, policy director at My Pension Expert, told Yahoo News after the budget.<\/p>\n

So even though those pensioners dependent on the state pension would be flagged as having a taxable income, Reeves said she will exempt those who fit under that criterion.<\/p>\n

\u201cIf it\u2019s not done automatically, pensioners should be able to claim their tax back, which is positive,\u201d Megson-Harvey added.<\/p>\n

Will pensioners have to complete a tax return?<\/p>\n

Speaking to Martin Lewis in November, Reeves promised that such pensioners “won’t have to pay the tax” or file returns during this parliamentary term, insisting workarounds would be found to avoid people chasing “tiny amounts of money”.\u200b<\/p>\n

\"Martin<\/p>\n

Martin Lewis from Money Saving Expert challenged Reeves over the freeze (PA via Getty)<\/p>\n

(Stefan Rousseau – PA Images via Getty Images)<\/p>\n

This is also the case for pensioners living off a state and private pension.<\/p>\n

\u201cFor retirees who have both a private and a state pension, they don\u2019t need to complete a self-assessment tax return,\u201d Megson-Harvey said.<\/p>\n

\u201cHMRC typically collects tax owed by adjusting the tax code on the private pension, using the pay as you earn (PAYE) system.\u201d<\/p>\n

How do I make my pension savings count?<\/p>\n

For those worried about how their pension could be hit by the personal allowance freeze, Megson-Harvey told Yahoo News \u201cthere is still time to plan\u201d how to make the most of savings.<\/p>\n

\u201cWhile it\u2019s quite likely these changes will come into effect by 2027, there is time to plan,\u201d Megson-Harvey said shortly after the budget announcement.<\/p>\n

\u201cIn the months and years to come, we really hope to see that the government does lay out a clear plan to make sure that all information about taxation for pensioners is accessible.\u201d<\/p>\n

For pension savers, there\u2019s even more time to take stock of the best options available.<\/p>\n

\u201cFirst of all, for those concerned about salary sacrifice changes<\/a>, those won’t come in until April 2029, so there\u2019s plenty of time to plan and track down all of your pensions to make sure you know exactly how much you have,\u201d Megson-Harvey said.<\/p>\n

\u201cIt’s worth considering looking at ISAs, particularly stocks and shares ISAs, if someone feels comfortable with that longer-term investment. It\u2019s also worth looking at different options for personal pensions.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"HMRC has confirmed it is \u201cworking\u201d with the Treasury to ensure pensioners will be exempt from paying income…\n","protected":false},"author":2,"featured_media":241825,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[114,268,7929,85,40030,46,12316,97982,266,267,130092,18122,1003,130093,50908],"class_list":{"0":"post-241824","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-finance","10":"tag-hmrc","11":"tag-il","12":"tag-income-tax","13":"tag-israel","14":"tag-pensioners","15":"tag-personal-allowance","16":"tag-personal-finance","17":"tag-personalfinance","18":"tag-private-pension","19":"tag-rachel-reeves","20":"tag-state-pension","21":"tag-tax-return","22":"tag-tax-threshold"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/241824","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=241824"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/241824\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/241825"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=241824"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=241824"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=241824"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}