Due to the Triple Lock, state pensioners face being dragged near to the HMRC Personal Tax-Free Allowance.
State pensioners with small private pensions face daunting letter from HMRC
State pensioners with just MODEST private pensions could soon face demands for tax from HMRC. Due to the Department for Work and Pensions (DWP) Triple Lock, state pensioners face being dragged near to the HMRC Personal Tax-Free Allowance.
It means retirees whose only income comes from the state pension will shortly discover themselves liable to pay. And it also means those holding modest private pensions or additional income sources are at risk of taxation.
Spencer Churchill Claims Advice stated: “If the triple lock remains in place, it is highly likely that by April 2027 the full state pension will actually surpass the personal allowance threshold.
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“That would mean some pensioners paying income tax purely on their state pension, something the Government will find politically difficult to justify. The Government faces a difficult balancing act.
“Removing the freeze on the personal allowance would cost billions at a time when fiscal headroom is already limited, yet scaling back the triple lock risks alienating older voters before the next election.”
The state pension triple lock is a rule that decides how much your state pension goes up each year. It guarantees that payments will rise by whichever is highest of Consumer Prices Index (CPI), average wage growth (measured from May to July of the previous year) OR a minimum of 2.5%.
It applies to the basic state pension (for those who reached state pension age before April 2016) and the new state pension (for those reaching it after). But it doesn’t cover everything – add-on pensions and some overseas pensions may not be included.
From April 2026, the state pension is due to rise by 4.7% thanks to the triple lock. For anyone on the full new state pension, that works out at about £241 a week, or just over £12,500 a year. It’s a decent bump that should help cover everyday costs.
The increase means the state pension is edging closer to the tax-free allowance. Unless the allowance goes up, some people could soon start paying tax on their pension alone.
On top of that, experts are warning that the triple lock is getting expensive for the government to keep up, even though ministers say they’re sticking with it for now.