Personal Allowance for Pensioners: Will the State Pension Be Taxed After the UK Budget?

UK taxMon 26 Oct 2026

The personal allowance for pensioners is the new tax-free amount that Chancellor John Healey is widely expected to announce in the UK Budget on Wednesday 28 October 2026. It exists to solve one awkward number: from April 2027 the full new state pension is set to rise above the £12,570 personal allowance for the first time. Below we explain why that happens, what has been promised, what is only reported so far, and who would still pay income tax. If you want to see how the frozen allowance affects a salary, try our UK salary after tax calculator, and our percentage calculator makes it easy to test a 3.9% rise on your own pension.

Last checked: 26 October 2026, against GOV.UK, HMRC guidance, the House of Commons Library and reporting from the BBC, the Guardian and the Telegraph. The Budget has not been delivered yet, so anything described as expected or reported is not yet official policy.

Quick answer

The full new state pension is expected to reach about £13,036 a year from April 2027, which is £466 above the frozen £12,570 allowance. The government has already promised that people whose only income is the basic or new state pension will not pay tax on it. Reports say the Budget will do this through a special allowance of £13,036 for low-income pensioners. Pensioners with other taxable income would still pay tax as they do now.

Key facts at a glance

The UK personal allowance has been £12,570 since 2021/22 and is frozen until April 2031, according to the House of Commons Library.
The full new state pension is £241.30 a week in 2026/27, or £12,547.60 a year, just £22.40 under the allowance (GOV.UK).
A 3.9% rise under the triple lock would take it to about £13,036.40 a year from April 2027, as reported by the BBC.
Without any change, that would leave a tax bill of roughly £93 a year for someone with no other income.
The Budget statement is expected at about 12:30 UK time on Wednesday 28 October, which is 15:30 Riyadh time.

What is the personal allowance for pensioners?

Every UK taxpayer gets a personal allowance, the slice of income that is taxed at 0%. GOV.UK lists it at £12,570 for the 2026/27 tax year, which runs from 6 April 2026 to 5 April 2027. Income above that is taxed at 20% up to £50,270, then 40%, then 45% at the top, and Scotland uses its own bands. The allowance is the same whether your income comes from a job, a workplace pension or the state pension.

What is new is the idea of a separate, higher allowance aimed only at pensioners on low incomes. Several outlets, citing The Times, report that the Budget will set it at £13,036, exactly matching the expected full new state pension, and that it would rise in step with the state pension for the rest of this parliament. The Telegraph reports it would protect almost a million pensioners and cost about £200 million a year by the end of the decade. The BBC reports that the Treasury has not yet confirmed the details, including how many people would be covered. Until the Budget documents are published, treat the exact figure as reported, not final.

Why the state pension is about to cross the tax line

Two policies are pulling in opposite directions. The first is the triple lock, which GOV.UK describes as raising the state pension each April by the highest of earnings growth, price inflation (CPI) or 2.5%. The second is the freeze on income tax thresholds. The Commons Library notes that the allowance reached £12,570 in 2021/22 and that the 2025 Budget extended the freeze to April 2031. A pension that rises every year will eventually overtake an allowance that does not move.

That moment arrives in April 2027. The full new state pension is £241.30 a week this year. Reports say next year's rise will follow earnings growth of 3.9%, which by our arithmetic gives about £250.70 a week, or £13,036.40 over 52 weeks. That is £466.40 above the allowance, and 20% of £466.40 is £93.28. The Guardian quotes the former pensions minister Steve Webb, now at LCP, putting the bill at about £90, which is in the same range once you allow for how HMRC counts the year.

The freeze is already pulling far more retired people into tax. The Guardian, using official figures, reports that the number of pensioners paying income tax rose from 7.1 million in 2022-23 to 9.6 million this year, out of about 13.3 million people who claim the state pension.

What the government has already promised

This is not a brand-new idea invented for this Budget. At the 2025 Budget the government said pensioners whose only income is the basic or new state pension would not have to pay small amounts of tax through Simple Assessment from 2027/28. Treasury minister Torsten Bell repeated that in a written parliamentary answer in February 2026, using a precise phrase that matters: the promise covers people whose sole income is the basic or new state pension without any increments.

What was missing was the method. The Commons Library briefing on taxation of the state pension, updated in September 2026, says no further details had been published. Its background briefing for this Budget, published on 22 October, lists the pensioner question as one of the things the Chancellor is expected to set out. At a Treasury Committee hearing in June 2026, an HMRC official estimated that between 800,000 and 1 million people receive only the state pension and said any change would need legislation in the next Finance Bill.

How the state pension is taxed today

HMRC guidance explains that the state pension is taxable but paid without tax taken off. If you also have wages or a workplace pension, HMRC usually changes your tax code so the tax on your state pension is collected from that other income. If it cannot do that, it may send a Simple Assessment bill after the tax year ends. HMRC also counts the year in a particular way: for most people it uses one week at the old weekly rate and 51 weeks at the new rate. Applied to the figures above, that gives about £13,027 of taxable state pension in 2027/28, or about £91 of tax at 20%, close to the estimates quoted by experts.

Who would still pay income tax?

The likely answer is most pensioners who pay tax today. The reported allowance is aimed at people living on the state pension alone. The Telegraph reports that pensioners with private pensions would still pay tax, and nothing published so far suggests a wider cut to the allowance for everyone over state pension age.

Your situation from April 2027	Likely position	Confidence
Full new state pension only, about £13,036 a year	No income tax under the promise; about £93 a year if nothing changed	Promise confirmed, method reported
Full basic state pension only, £184.90 a week this year	About £9,615 a year now and still well below £12,570 after a 3.9% rise, so no tax either way	Our arithmetic from GOV.UK rates
State pension plus a workplace or private pension	Taxed as now, mostly through your tax code	Reported; wait for Budget documents
State pension with extra amounts (for example SERPS or deferral increments)	Unclear; the existing pledge excludes increments	Open question

The last row is the one to watch on Wednesday. Rachel Vahey of AJ Bell has pointed out that many people on the older system already pass the allowance through additional state pension such as SERPS, and already pay tax. Commentators have also raised a possible cliff edge: if the special treatment applies only when the state pension is your sole income, a person with a small amount of savings interest or part-time pay could lose the protection completely. Whether the Budget smooths that out is one of the main details to check.

What else to watch in the Budget for pensioners

The Budget statement follows Prime Minister's Questions on Wednesday, with the UK Parliament saying it is expected at around 12:30pm UK time. The UK moved to Greenwich Mean Time on 25 October, so that is 15:30 in Riyadh. The Office for Budget Responsibility publishes its forecast the same day, and the full Budget documents usually appear on GOV.UK straight after the speech. The Telegraph and LBC also report that a planned cut to the maximum tax-free pension lump sum, currently £268,275, is on hold. That is reported rather than announced, so check the documents before acting on it.

What to do now

Check your exact weekly state pension on your latest letter from the Department for Work and Pensions, not the headline full rate.
If you have any other pension or earnings, look at the tax code on your payslip or pension statement after April, because that is where any change will show.
Do not ignore a Simple Assessment letter. It tells you how HMRC worked out the bill, and you can query it if the figures look wrong.
Read the official Budget documents on Wednesday afternoon before making any decision about drawing a lump sum or deferring your pension.

How we checked this

We took the current personal allowance and tax bands from GOV.UK, the 2026/27 new and basic state pension rates from GOV.UK, and HMRC's description of how the state pension is taxed from its own guidance. The history of the freeze and the 2027/28 promise comes from two House of Commons Library briefings and a written parliamentary answer. The reported £13,036 allowance, the near one million figure and the £200 million cost come from the BBC, the Telegraph and LBC, all reporting on 25 and 26 October 2026, and we label them as reported because the Treasury has not confirmed them. The £93.28, £13,027 and basic state pension figures are our own arithmetic from those official rates. We will update this explainer once the Budget is published.

FAQ

Will the state pension be taxed from April 2027?

The state pension is already taxable income. For people whose only income is the basic or new state pension, the government has promised no income tax bill from 2027/28, and the Budget is expected to explain how.

What is the new personal allowance for pensioners?

Reports say it will be £13,036 for low-income pensioners, matching the expected full new state pension. It is not official until the Budget on 28 October 2026.

Is the normal personal allowance going up?

No change has been announced. The £12,570 allowance remains frozen until April 2031 under current law.

I have a small workplace pension too. Am I covered?

Probably not, based on what has been published so far. Pensioners with other taxable income are expected to keep paying tax as they do now.

What time is the Budget in Saudi Arabia?

The statement is expected at about 12:30 UK time on Wednesday 28 October, which is 15:30 Riyadh time.

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