Chancellor Rachel Reeves has ruled out tax bills for people relying solely on the state pension, but pensioners over the age of 75 will be excluded from a new personal tax-free allowance perk offered by HMRC. As the Triple Lock policy continues to increase the state pension, Reeves has confirmed that those dependent only on the state pension will not face additional tax charges.
Triple Lock and Tax Thresholds
The State Pension is guaranteed to rise by at least 2.5% each year under the government's Triple Lock policy. However, the actual annual increase applied each April is determined by whichever of three measures is highest: inflation (CPI), average earnings growth, or 2.5%. While 2.5% remains the minimum baseline, the exact percentage for 2027 and beyond will be announced late each year once official wage and inflation statistics are published.
The current state pension of £12,547 could be boosted by a minimum of £313, taking the personal tax-free allowance to a theoretical £12,860. However, millions are set to miss out on this exemption, according to LCP, the consultancy firm led by former Pensions Minister Sir Steve Webb.
Who Qualifies?
LCP has found that only around 5.4% of Britain's pensioners—roughly one in 18—are likely to benefit from the scheme, which is due to begin in 2027/28. No pensioner who reached state pension age before April 6, 2016 (those born before April 6, 2016) is expected to qualify. LCP estimates that tax bills could rise to £220 by 2029-2030 for state pensioners affected by the taxman.
Currently, there are approximately 13.2 million state pension recipients. Around 7.7 million pensioners on the old state pension system will automatically miss out. Of the roughly 5 million on the new state pension, most will also fail to qualify because they have additional income, protected payments, or overseas residency.
Sir Steve Webb said: “Two separate policies—triple lock uprating of the state pension and freezing of tax thresholds—will collide next year. From 2027 onwards, someone with just the new state pension and no other income will start getting annual tax bills from HMRC.”
He added: “The proposed solution is deeply flawed. It discriminates against those on the old state pension system, even if they have identical income to someone on the new system.”
Why Over-75s Miss Out
The reason state pensioners over 75 will not benefit is that Chancellor Reeves has not shielded state pension additions or increments from bills. With the basic state pension—paid to those over age 75—being far less, many rely on extra state pension income through SERPS or the State Second Pension, which disqualifies them from the new allowance.
