State Pensioners issued £22 tax free warning – HMRC issues update | Personal Finance | Finance
Pensioners could face an unexpected tax bill with a rise in State Pension payments meaning people could miss out on HMRC’s tax-free allowance. People are being urged to think before accessing additional pension savings. Even small withdrawals could trigger the unexpected bill. In the 2026/2027 financial year, people who receive the state pension could take a blow.
After pension payments, there could be just £22 left of their Personal Allowance, reports GB News. Brits who collect the full new State Pension of £12,548 annually will find this sum almost entirely consumes the £12,570 tax-free threshold set by HMRC. Those looking to retire could face a difficult position if needing to access additional pension savings.
Antonia Medlicott, founder and managing director of financial education specialists Investing Insiders, has highlighted four considerations for anyone preparing to access their retirement savings, reports GB News.
Antonia says: “The standard UK income tax Personal Allowance currently sits at £12,570, so everything you earn up to this amount each year is free of tax.
“However, your State Pension is also included in this amount at £12,548 in 2026/27, so you’re left with just £22 of tax-free income before making a single withdrawal from any other pension.
“This is something that many people forget and can seriously affect your pension plans if not accounted for.”
She says this is something many people overlook, which can seriously affect pension planning if not properly accounted for.
The expert also noted that from April 2027, pensions are expected to become part of estates for inheritance tax purposes.
She urged retirees to regularly review their drawdown plans rather than leaving initial strategies unchanged.
She also says it’s crucial to withdraw the right amount of money.
Antonia says: “When taking any amount of money out of your pension, it’s important to keep two main things in mind: taking out only as much as you need, and making sure it will last.
“For example, with a £600,000 pot growing at 4% a year net of charges, withdrawing £25,000 a year will still leave you with £488,000 in the pot after 30 years.
“At £30,000 a year, you’ll be left with £196,000. But rise to £35,000 and your pot runs out after 28 years, reducing to around 22 years if you withdraw £40,000 annually.”
