In a major move unveiled in the 2025 Budget, the government has announced that individuals whose only income is the state pension will not have to pay income tax — even when the pension amount exceeds the standard tax-free personal allowance.
Rachel Reeves, Chancellor and architect of the policy, said that pensioners receiving solely the basic or new state pension will not be required to complete a tax return or pay any tax “during this Parliament.”
The change comes amid concern that rising pension payments — boosted under the “triple lock” — combined with a frozen personal allowance of £12,570, could push many pensioners into taxation in coming years.
Under the new arrangement, small tax bills triggered by modest pension increases will be waived, and pensioners will avoid the administrative burden of a tax return.
Critics have warned the plan may introduce complexity and unfairness — particularly for those receiving both a state pension and small additional income such as a private pension or savings interest — and have called for clarity on how “sole income” will be defined.
For millions of retirees, the announcement offers welcome reassurance: for now, those living entirely on their state pension should remain exempt from income tax amid rising living costs and a changing fiscal landscape.
Rachel Reeves, Chancellor and architect of the policy, said that pensioners receiving solely the basic or new state pension will not be required to complete a tax return or pay any tax “during this Parliament.”
The change comes amid concern that rising pension payments — boosted under the “triple lock” — combined with a frozen personal allowance of £12,570, could push many pensioners into taxation in coming years.
Under the new arrangement, small tax bills triggered by modest pension increases will be waived, and pensioners will avoid the administrative burden of a tax return.
Critics have warned the plan may introduce complexity and unfairness — particularly for those receiving both a state pension and small additional income such as a private pension or savings interest — and have called for clarity on how “sole income” will be defined.
For millions of retirees, the announcement offers welcome reassurance: for now, those living entirely on their state pension should remain exempt from income tax amid rising living costs and a changing fiscal landscape.
UK State Pension
Rachel Reeves
Tax
Personal Allowance
Budget
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