People claiming State Pension set for 2027 income tax bill as 8.5 million pay this year
The Department for Work and Pensions (DWP) has revealed that there are currently 13 million people of State Pension age across the UK. The official retirement age is presently 66, with plans to increase it to 67 between 2027 and 2028.
It's been confirmed by the government that an estimated 8.51 million people of State Pension age paid income tax in the 2024/25 financial year. With the Personal Allowance set to remain frozen at £12,570 until the start of the 2027/28 tax year, more retirees are expected to pay tax on their pension income.
The government has also pledged to uphold the Triple Lock policy during this parliamentary term. However, this could result in everyone receiving the full, New State Pension exceeding the tax threshold within just two years.
The Triple Lock policy ensures that the New and Basic State Pensions rise each year in line with whichever is highest: the average annual earnings growth from May to July, CPI in the year to September, or 2.5 per cent. This policy aims to prevent the value of the State Pensions from being eroded by cost of living increases.
(Image: Getty)
In April, the New and Basic State Pensions rose by 4.1 per cent. However, future predictions from the Labour Government anticipate a rise of 2.5 per cent over the next four financial years, reports the Daily Record.
Based on these figures, the full New State Pension is projected to be worth £12,578.80 in the 2027/28 financial year - £78.80 above the Personal Allowance.
While the taxable portion of the State Pension might seem insignificant - as tax is only levied on the amount exceeding the Personal Allowance - pensioners with additional income sources could find themselves shelling out more for a tax bill, unless it's automatically deducted from private or workplace pensions via PAYE.
Online guidance at GOV.UK on who might need to pay tax on their pension also includes a handy tool to calculate how much tax someone might need to pay, and the different ways this can be done.
The latest State Pension Triple Lock predictions show the following projected annual increases:
2025/26 - 4.1%, the forecast was 4%
- 4.1%, the forecast was 4% 2026/27 - 2.5%
- 2.5% 2027/28 - 2.5%
- 2.5% 2028/29 - 2.5%
- 2.5% 2029/30 - 2.5%
State Pension payments 2025/26
Full New State Pension
Weekly payment: £230.25
Four-weekly payment: £921
Annual amount: £11,973
Full Basic State Pension
Weekly payment: £176.45
Four-weekly payment: £705.80
Annual amount: £9,175
Future new State Pension forecasts
Under a 2.5 per cent increase, the full New State Pension will be worth:
2026/27 - £236 per week, £12,227.30 a year
- £236 per week, £12,227.30 a year 2027/28 - £241.90 per week, £12,578.80 a year
What is taxed
Guidance on GOV.UK states: 'You pay tax if your total annual income adds up to more than your Personal Allowance. Find out about your Personal Allowance and Income Tax rates.
Your total income could include:
the State Pension you get - Basic or New State Pension
Additional State Pension
a private pension (workplace or personal) - you can take some of this tax-free
earnings from employment or self-employment
any taxable benefits you get
any other income, such as money from investments, property or savings
Check if you have to pay tax on your pension
Before you can check, you will need to know:
if you have a State Pension or a private pension
how much State Pension and private pension income you will get this tax year (April 6 to April 5)
the amount of any other taxable income you'll get this tax year (for example, from employment or state benefits)
You cannot use this tool if you get:
any foreign income
Marriage Allowance
Blind Person's Allowance
Use this online tool at GOV.UK to check if you have to pay tax on your pension.
The full guide to tax when you get a pension can be found on GOV.UK here.
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