Last updated: 14 October 2026
Why are more pensioners facing income tax bills?
More pensioners are paying income tax because the Personal Allowance has been frozen at £12,570 while the State Pension keeps rising under the triple lock. The full new State Pension is £241.30 a week in 2026/27, about £12,548 a year, which is only just below the allowance. Anyone with even a small workplace or private pension, savings interest or rental income on top is likely to pay tax. Former pensions minister Baroness Ros Altmann has warned that many retired people don’t expect this and may not realise they owe tax.
How the freeze affects retired people
| Year | Personal Allowance | Full new State Pension (yearly, approx.) |
| 2021/22 | £12,570 | £9,339 |
| 2024/25 | £12,570 | £11,502 |
| 2025/26 | £12,570 | £11,973 |
| 2026/27 | £12,570 | £12,548 |
The allowance is frozen until April 2031. If the State Pension continues to rise, it could exceed the allowance before then.
How HMRC collects tax from pensioners
The State Pension is paid gross, with no tax taken off. HMRC collects the tax in one of three ways:
- Through a tax code on a workplace or private pension, which reduces the allowance given against that pension
2. Simple Assessment, a bill HMRC sends if there’s no other pension to collect it from
3. Self Assessment, if you already file a return, for example because you have rental income
Example
Margaret receives the full new State Pension of £12,548 and a small work pension of £6,000. Her total income is £18,548. After the £12,570 allowance, £5,978 is taxable at 20%, so her bill is about £1,196. HMRC collects this through the tax code on her work pension, so the pension provider deducts more tax than she might expect.
Steps pensioners can take
- Check every tax code notice (P2) and compare the State Pension figure with your annual uprating letter
- Claim the Marriage Allowance if your spouse or civil partner has income below the allowance and you’re a basic-rate taxpayer
- Use ISAs for savings, so interest doesn’t add to your taxable income
- Use your £5,000 starting rate for savings and £1,000 Personal Savings Allowance before tax applies to interest
- Consider when you draw taxable pension lump sums, to keep income within the basic-rate band
- Respond to Simple Assessment letters within 60 days if you think they’re wrong
Watch out for scams
Fraudsters target pensioners with fake HMRC messages about refunds or tax owed. HMRC won’t ask for bank details by text or email. If in doubt, sign in to your HMRC account directly.
Deferring your State Pension
If you defer claiming, your State Pension increases by 1% for every 9 weeks you put it off. That can help if you are still working, but the higher pension is still taxable when you claim it.
Frequently asked questions
Is the State Pension taxable?
Yes. It counts as income, even though no tax is deducted when it’s paid.
Will I get a tax bill if my only income is the State Pension?
If the full new State Pension stays below £12,570, no tax is due. Check gov.uk each April for any change.
Why has my work pension tax increased?
Usually because your tax code now reflects a higher State Pension.
Can I reclaim tax if I’ve overpaid?
Yes, for up to 4 tax years.
Related: paying tax on your State Pension and Marriage Allowance.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with tax planning in retirement. See our personal tax accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
