Rachel Reeves announced an exemption for state pensioners with no other income (Image: Getty)
Older state pensioners will not be given an exemption on their tax bills if they have any other DWP pension payments even if they have no other income, despite a tax promise from Rachel Reeves.
The chancellor announced after the last Budget that state pensioners who do not have any other income will not be made to pay tax on their state pension payments next year.
Her announcement of a special exemption for pensioners followed fears that state pensioners who rely solely on the DWP income would lose some of their pension payments to tax from April 2027, when the triple lock increases are forecast to take the full new state pension above the annual £12,570 Personal Allowance threshold for the first time.
However, the state pension has always been taxable and older state pensioners who participated in now-defunct additional pension (AP) schemes are in many cases already paying tax on their pension income.
Those older, basic state pensioners with additional pension payments from the DWP will not be allowed to get an exemption on their tax bills, HM Treasury confirmed to the Express, even if they have no other non-DWP income, like private pensions or work.
The additional state pension is an extra amount of money you could get on top of your basic state pension if you’re a man born before April 6, 1951 or a woman born before April 6, 1953 unless you were ‘contracted out’ by your employer.
There is no fixed amount for additional state pension, as it is made up of three schemes: State Second Pension, which ran from 2002 to 2016, State Earnings Related Pension Scheme (SERPS) from 1978 to 2002 and state pension top up, which ran from October 2015 to April 2017.
From April 6, 2026, AP payments increased to a maximum of £230.54 per week, up from £222.10, which is paid on top of the £184.90 basic state pension.
In November, Ms Reeves told Parliament: “People only in receipt of the basic or new state pension do not have to pay small amounts of tax through simple assessment from April 2027.”
The next day, the Chancellor appeared on the Martin Lewis Money Show Live on ITV1 where she confirmed that this was not merely an announcement that state pensioners would not need to fill out an assessment form, but that they would be entirely exempt from paying tax at all, if they had no other income besides the DWP state pension, either basic or new.
Martin asked Ms Reeves: “But people will have to pay the tax, they just won’t have to do a return or will they not have to pay the tax?” Ms Reeves replied: “In this Parliament they won’t have to pay the tax.
“Further on, I’m not able to make any commitments on that. We are looking at a simple workaround at the moment.”
However, HM Treasury has confirmed that for older basic state pensioners, this exemption will only apply to those who don’t have any ‘increments’, such as the additional pension schemes.
An HM Treasury spokesperson said: “Anyone whose only income is the full new or basic state pension without any increments will not pay income tax and we are committed to that over this Parliament.
“By keeping the triple lock, 12 million pensioners will see their income rise by up to £470 this year, and they continue to benefit from the highest Personal Allowance in the G7.”
