State pension set to rise £500 and top £13,000 — the income tax sting explained
The state pension rise 2026 will see retirees receive around £500 more each April, pushing the annual figure above £13,000 for the first time, but the real story is a tax sting that will quietly erode that gain for millions of pensioners with any additional income. The headline increase is welcome, but the frozen personal allowance means far more retirees are now in the income tax net than before.
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The £500 rise explained
The triple lock guarantees the state pension rises each April by the highest of earnings growth, CPI inflation, or 2.5%. The latest ONS data shows average pay grew by 4.1% in the April to June 2025 period, which is currently the leading figure. If that holds when the decisive May to July 2025 earnings data is published in September, the full new state pension would rise from £241.30 to around £251.20 a week, a gain of just over £515 a year.
That takes the annual figure for the full new state pension to roughly £13,062, which is why the “£13,000” headline is circulating. It is worth being clear, though: the May to July figure has not yet been published, and the final increase could differ. Nothing is confirmed until the September data lands.
Where the tax sting bites
The personal allowance has been frozen at £12,570 since 2021, and the government confirmed in the 2025 Budget that it will stay there until April 2031. The full new state pension currently stands at £12,547.60 a year, just £22.40 below the threshold.
A 4.1% increase would take the pension to around £13,062, which is £492 above the personal allowance. That sounds like an immediate tax problem, but the picture is more nuanced. Steve Webb, partner at LCP and former Pensions Minister, has confirmed that, unless things shift sharply, most people on the new state pension can expect around £500 extra next April. He also flagged the “sting in the tail”: as the pension creeps closer to and then above the tax threshold, recipients with any other income have steadily less of their personal allowance left to shelter it.
The April 2026 rise does not, on its own, push the state pension above the personal allowance. The pension will be close, around £13,062, against a threshold of £12,570, but those figures show it crossing the threshold, not sitting below it. The crossing into taxable territory for those with the pension as their sole income is, on current projections, a 2027 event. The government has already pledged that from 2027/28, pensioners whose only income is the full new or basic state pension will not face a simple assessment tax bill. A Treasury spokesperson confirmed: “Anyone whose only income is the full new or basic State Pension without any increments will not pay income tax.”
Who actually faces a tax bill in April 2026
The immediate sting lands on pensioners with any income on top of the state pension. That means anyone drawing a private pension, a workplace pension, or meaningful savings interest alongside their state pension. With the state pension consuming nearly all of the £12,570 personal allowance, even a modest additional income becomes almost entirely taxable.
State pension is taxable income, but the DWP does not deduct tax before payment. HMRC normally collects what is owed either through the PAYE code on another pension or via a simple assessment notice sent after the tax year ends. That means many pensioners will receive their full state pension payment, only to receive a tax bill later. It catches people off guard.
The broader fiscal drag picture
The scale of the problem is visible in the numbers. The count of pensioners paying income tax rose from 6.7 million in 2021/22 to 8.8 million in 2025/26. The OBR’s spring statement projected that 600,000 more pensioners than previously estimated will face income tax by 2026/27, with that figure rising to 1 million by 2030/31. Frozen thresholds, rather than new policy, are doing most of the work here.
What happens in 2027
The 2027 picture is the sharper concern. Steve Webb described it as a near certainty that a further triple lock increase in April 2027 would push the new state pension above the personal allowance. The government’s pledge to protect sole-state-pension recipients from simple assessment applies from 2027/28, but the mechanism has not yet been detailed. For the majority of pensioners who also have other income, the government’s promise offers no shelter, and that group could face a cliff edge as the pension tips into taxable territory with nothing shielding their additional income.
Verdict
The April 2026 rise is real and worth having. But if you have any income alongside the state pension, now is the right time to check your total taxable income and understand what your PAYE code is doing. The gap between your state pension and the personal allowance is narrowing fast, and that means less shelter for everything else you earn or draw.
Frequently asked questions
Will I pay income tax on my state pension from April 2026?
Not if the state pension is your only income. The April 2026 rise takes the pension close to the personal allowance but does not push a single-income pensioner into paying tax. If you have other income such as a private pension or savings interest, you may already be paying tax, and the reduced remaining allowance will make that more likely.
Why is the personal allowance frozen and when does that change?
The personal allowance has been fixed at £12,570 since 2021/22. The government confirmed in the 2025 Budget that it will stay at that level until April 2031. Every year the state pension rises while the allowance stays still, more of your income becomes taxable.
How does HMRC collect tax on the state pension?
The DWP pays the state pension in full without deducting tax. HMRC normally adjusts the PAYE code on any other pension you receive to collect what is owed, or sends a simple assessment notice after the tax year ends if there is no other pension to code against.
When will the actual April 2026 increase be confirmed?
The decisive figure is the May to July 2025 ONS earnings data, which will be published in September 2025. The government will then confirm the April 2026 state pension rate shortly after.
What is the government doing to protect pensioners from being taxed purely on their state pension?
The government has pledged that from 2027/28, pensioners whose sole income is the full new or basic state pension will not face a simple assessment tax bill. However, the practical mechanism for this has not yet been published, and the protection does not apply in April 2026. Pensioners with any other income are not covered by the pledge.
The April 2026 rise gives pensioners a meaningful cash boost, but the frozen personal allowance means the tax system is quietly taking more back from those with other income. Getting clear on your own position before April is the practical step worth taking now.
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