Why the frozen Personal Allowance matters – and what pensioners should check
Information correct at 2 September 2026
| The important point: the State Pension is already taxable income. The issue is that the full new State Pension could soon rise above the standard tax-free Personal Allowance. |
For many years, a person receiving only the full new State Pension has normally had no Income Tax to pay because the annual pension remained below the Personal Allowance. That position is now very close to changing.
For the 2026/27 tax year, the full new State Pension is £241.30 a week. Over 52 weeks, that is £12,547.60 – only £22.40 below the standard Personal Allowance of £12,570. The Personal Allowance applies across the UK, including Northern Ireland.
Why April 2027 could be a turning point
The State Pension normally rises each April under the triple lock. It increases by the highest of average earnings growth, Consumer Prices Index inflation or 2.5%.
The final 2027/28 increase had not been confirmed at the date of this article. However, if the eventual increase is 4.1%, as currently illustrated in press reports, the full new State Pension would rise to about £251.20 a week, or £13,062.40 over 52 weeks.
If the Personal Allowance remains £12,570, this would place approximately £492.40 of the pension above the allowance. At the 20% basic rate, the indicative tax would be about £98.50 for the year – before considering any special government arrangement and assuming there is no other income.
| Illustration | 2026/27 | If a 4.1% rise applies in 2027/28 |
| Full new State Pension – weekly | £241.30 | about £251.20 |
| Annual amount (52 weeks) | £12,547.60 | about £13,062.40 |
| Standard Personal Allowance | £12,570 | £12,570 |
| Amount above the allowance | Nil | about £492.40 |
| Indicative basic-rate tax | Nil | about £98.50 |
Illustration only: the final State Pension rate and the detailed government treatment for 2027/28 were not confirmed at 2 September 2026.
Who is most likely to be affected?
Income Tax is based on total taxable income, not on the State Pension in isolation. A pensioner may therefore pay tax even where the State Pension itself is below the Personal Allowance.
- a workplace or private pension;
- earnings from employment or self-employment;
- Additional State Pension, a protected payment or an increase resulting from deferring the State Pension;
- taxable property, investment or savings income; or
- other taxable benefits or income.
What about people on the old basic State Pension?
The full basic State Pension is £184.90 a week in 2026/27, which remains well below the Personal Allowance. However, many people also receive Additional State Pension built up under SERPS or the State Second Pension, or receive other pension income. Those amounts can bring total taxable income above the allowance.
Will pensioners whose only income is the State Pension be protected?
The Government stated in Budget 2025 that it intends to ease the administrative burden where a pensioner’s sole income is the basic or new State Pension without any increments. The stated aim is that these pensioners would not have to pay small amounts through Simple Assessment from 2027/28 if the State Pension exceeds the Personal Allowance.
This is not a general exemption for all pensioners. The Government also said it was still considering the best way to deliver the measure and would provide further details. Until those details are published, pensioners should not assume that they will qualify.
On the wording announced so far, someone with a private pension, Additional State Pension, deferred-pension increase or other taxable income may fall outside the intended protection.
What should pensioners do now?
- Check the weekly and annual amount of State Pension you expect to receive.
- Add all workplace, private and other taxable pension income for the tax year.
- Include earnings and other taxable income, while taking account of any allowances that genuinely apply.
- Check your HMRC Personal Tax Account and tax codes, particularly if you have more than one pension.
- Seek advice where you receive Additional State Pension, a protected payment, deferred pension, foreign income or several income sources.
| Do not make changes to pension arrangements solely because of a headline. A small tax charge does not necessarily mean you are worse off overall, as the pension increase may still be greater than the tax due. |
The wider issue: fiscal drag
This situation is an example of fiscal drag. Pension income rises, but the tax-free threshold stays fixed, so a growing number of people are drawn into the tax system without a change to the headline basic rate of Income Tax.
For pensioners, the practical result may be a new tax code, tax deducted from another pension, or contact from HMRC. The amount involved may initially be small, but it can increase if the State Pension continues to rise while the Personal Allowance remains frozen.
Conclusion
The State Pension has not suddenly become taxable: it has always formed part of taxable income. What is changing is the relationship between a rising pension and a frozen Personal Allowance.
The position for April 2027 will depend on the confirmed State Pension increase and the final details of the Government’s proposed treatment for people whose only income is a basic or new State Pension without increments. Anyone with other pension or taxable income should expect their individual position to depend on their total income for the year.
If you would like help checking how your State Pension and other income may interact, contact Bernard Tierney & Company.
Official sources
GOV.UK – Income Tax rates and Personal Allowances
GOV.UK – The new State Pension: what you’ll get
GOV.UK – Tax when you get a pension
Disclaimer: This article provides general information only and does not constitute personal tax, pension or financial advice. Tax treatment depends on individual circumstances and may change.