The UK state pension increased in April 2025 under the triple lock guarantee, which ensures the state pension rises each year by the highest of: inflation (CPI), average earnings growth, or 2.5%. Understanding how the state pension is taxed — and how it interacts with the personal allowance — has become increasingly important as the pension continues to climb toward and potentially beyond the personal allowance limit.
The 2025-26 State Pension Amounts
The triple lock increase for 2025-26 was based on average earnings growth of 4.1% (the highest of the three measures):
New State Pension (Post-2016 Claimants)
- Full amount: £221.20 per week (£11,502.40 per year)
- This applies to people who reached state pension age on or after 6 April 2016
- The maximum amount requires 35 qualifying years of National Insurance contributions
- You need at least 10 qualifying years to receive any state pension
Basic State Pension (Pre-2016 Claimants)
- Full amount: £169.50 per week (£8,814 per year)
- This applies to people who reached state pension age before 6 April 2016
- Some pre-2016 retirees also receive an Additional State Pension (SERPS or S2P) on top
Your actual entitlement may differ depending on your National Insurance record. You can get a state pension forecast at gov.uk.
How the State Pension Is Taxed
The state pension is taxable income, but HMRC does not deduct tax from it at source. Instead:
- Your state pension counts toward your total income for tax purposes
- It uses up part of your personal allowance (£12,570 for 2025-26)
- Any other income (such as a workplace pension, private pension, or part-time earnings) is taxed after the state pension has consumed its share of the personal allowance
This means the practical impact depends on your other income:
If the State Pension Is Your Only Income
At £11,502.40, the full new state pension falls below the £12,570 personal allowance for 2025-26. If the state pension is your sole income, you pay no income tax. You still have £1,067.60 of personal allowance remaining to offset other income.
If You Have a Workplace or Private Pension
This is where most pensioners pay tax. Say you receive £11,502 from the state pension and £8,000 from a workplace pension, giving total income of £19,502.
- Personal allowance: £12,570
- Taxable income: £19,502 − £12,570 = £6,932
- Income tax at 20%: £1,386.40
HMRC collects this tax by adjusting the tax code applied to your workplace or private pension — they effectively tax the other pension at a higher rate to account for the state pension consuming part of the personal allowance.
The Narrowing Gap: Approaching the Personal Allowance
The state pension has been rising steadily under the triple lock while the personal allowance has been frozen at £12,570 since 2021. The gap between them is closing:
| Year | Full new state pension (annual) | Personal allowance | Gap |
|---|---|---|---|
| 2021-22 | £9,339.20 | £12,570 | £3,230.80 |
| 2022-23 | £9,627.80 | £12,570 | £2,942.20 |
| 2023-24 | £10,600.20 | £12,570 | £1,969.80 |
| 2024-25 | £11,502.40 | £12,570 | £1,067.60 |
| 2025-26 | £11,502.40 | £12,570 | £1,067.60 |
If the state pension continues to increase by 4% per year while the personal allowance stays at £12,570, the state pension will exceed the personal allowance by approximately 2026-27. At that point, state pension recipients would owe income tax on their state pension even if they have no other income.
Note: The 2025-26 state pension figure used above (£11,502.40) may be updated once the 2026-27 triple lock increase is confirmed.
HMRC Tax Codes for Pensioners
Because the state pension is paid gross by the Department for Work and Pensions (DWP), HMRC adjusts the tax code applied to any other pension or employment income to collect the right amount of tax.
If you receive the state pension plus a PAYE income, you may see a tax code such as S1057L or 1057L — this reflects the personal allowance minus the amount of state pension that consumes it.
If your tax code looks odd or you have multiple income sources, check via your HMRC Personal Tax Account or call HMRC’s pension helpline. Errors in tax codes can mean you’re overpaying or underpaying tax on your pension.
Self Assessment for Pensioners
Most pensioners do not need to file a Self Assessment tax return — HMRC collects any tax through the PAYE system by adjusting tax codes. However, you will need to file Self Assessment if:
- Your total untaxed income (including state pension, if PAYE doesn’t cover everything) exceeds your personal allowance
- You have rental income, savings interest above your personal savings allowance, or other income that isn’t taxed at source
- Your total income exceeds £100,000 (personal allowance taper)
- You are a self-employed pensioner
If you’re not sure whether you need to file, use HMRC’s online checker or contact HMRC directly.
National Insurance and the State Pension Age
Once you reach state pension age (currently 66 for both men and women), you no longer pay National Insurance contributions, even if you continue to work. This applies to:
- Class 1 employee NI contributions
- Class 4 self-employed NI contributions
You may still see Class 1A employer NI on benefits-in-kind if you are an employee, but your own NI liability stops at state pension age. This is a useful point for pensioners who continue working — it means a higher proportion of earnings is kept compared with younger workers.
Deferring Your State Pension
If you delay taking your state pension beyond state pension age, it increases by 1% for every 9 weeks you defer (approximately 5.8% per year). There is no maximum deferral period.
Deferral may be tax-efficient if:
- You are still working and receiving a high income — deferring avoids the state pension pushing you into a higher tax band
- You expect to live long enough to benefit from the higher payments
- You want to reduce the risk of the state pension consuming your personal allowance in years when you are still employed
Whether deferral makes financial sense depends on your personal circumstances, health, other income, and life expectancy. The break-even point is typically around 15–17 years of deferral.
Tips for Tax-Efficient Retirement Income
- Check your state pension forecast at gov.uk to ensure your NI record is complete — you can make voluntary Class 3 NI contributions to fill gaps
- Review your tax code — HMRC should adjust your workplace pension code to account for state pension, but errors happen
- Consider pension drawdown timing — if you have a SIPP or personal pension, you have flexibility in when you take income and can manage your tax position year by year
- Use your ISA savings — ISA withdrawals are completely tax-free and do not count as income, making them ideal for bridging years where you want to keep taxable income low
- Married couples: check whether a lower-earning spouse has unused personal allowance and consider transferring income-producing assets to them
Use our income tax calculator to see how the state pension interacts with your other pension and investment income in 2025-26.