State pensione update over changes to tax on payments | Personal Finance | Finance

People claiming the state pension could soon benefit from a new tax exemption on their payments. The update comes as a major HMRC change is confirmed to be coming in very soon for how the state pension is taxed.

As announced at the Autumn Budget 2025, Labour is bringing in a policy so that people whose only income is the state pension, with no additional amounts, will not have to pay income tax on their payments. This change was deemed necessary as the full new state pension will cross the line into becoming liable for income tax, after the April 2027 triple lock increase.

Now a new campaign has been launched calling for an even more far-reaching policy on this issue. A petition to Parliament is calling for the state pension to no longer be taxed at all.

‘Should not be taxed’

The petition urges: “British citizens who have, though out their working life, paid National Insurance and tax, should not then be taxed on the state pension regardless of other earning/pensions.”

Under current rules, the state pension is subject to income tax, similar to how any employment income or pension income you receive is as well. The full new state pension currently pays £241.30 a week, or around £12,550 a year.

So if you are a basic rate taxpayer and already have enough income to use up your personal allowance and started to claim your state pension, you would pay around £2,510 in tax on it. The petition urges: “They have worked throughout their lives and paid tax on their earnings, to then be taxed again is abhorrent.”

State pension tax change confirmed

The Government has yet to confirm the details of how the new tax policy will work, whereby those whose only income is the state pension with no increments will not have to pay tax on their payments.

The full new state pension is £241.30 a week, or around £12,550 a year. That puts it within touching distance of the £12,570 personal allowance, the amount most people can earn before paying income tax.

State pension payments rises every April under the triple lock, which guarantees an increase based on whichever is highest out of 2.5%, average earnings growth or inflation. So the full new state pension will definitely attract a tax bill under the current rules.

HMRC officials said previously that legislation will need to be prepared to enact the change. You can sign the petition on the website.