If you're a UK pensioner or approaching retirement, there's welcome news on the horizon. The state pension is set to increase by 4.8% from April 2026. Now while this increase will be appreciated by millions, it comes with some important considerations, particularly around tax implications.
How much is the State Pension rising by?
From April 2026, the full new state pension will increase from £230.25 per week to £241.30 per week. In annual terms, this represents a rise from £11,973.00 to £12,547.60 – an increase of £574.60 per year, or about £11.05 per week. That's approximately £1.58 more every day.
For those receiving the basic state pension (available to men born before April 6, 1951, and women born before April 6, 1953), the increase is proportionally the same. Your pension will rise from £176.45 per week to £184.90 per week, representing an annual increase of £439.80.
These aren't small numbers. An extra £574 annually might cover your household bills for a couple of months, contribute significantly to your food shopping, or provide that little bit of extra breathing room that makes a real difference to your quality of life.
Is the Pension Triple Lock the reason for the increase?
The "Triple Lock" is a mechanism that has protected pensioners' incomes since 2011, and is actually quite straightforward. Every year, the government looks at three different measures and increases the state pension by whichever is highest:
- The growth in average earnings (measured from May to July).
- The rate of inflation in September (measured by the Consumer Price Index).
- A minimum guarantee of 2.5%.
For April 2026, here's how the finalised numbers were used. Average earnings grew by 4.8% between May and July 2025, while September's inflation came in at 3.8%. Since 4.8% is the highest of these three figures (remember, the minimum 2.5% is lower than both), that's the percentage by which the pension will increase.
This triple lock mechanism was introduced by the Coalition Government in 2011 and has been maintained by successive governments ever since. It was created to address a serious problem: between 1980 and 2010, state pensions were only increased in line with prices, not earnings. This meant that over those three decades, pensioners fell further and further behind working people in terms of their relative incomes. By 2010, the basic state pension had fallen to just 16% of average earnings, compared to 26% in 1980.
The triple lock was designed to restore the value of state pensions and ensure they would never again be allowed to wither away through decades of inadequate uprating. It's proved remarkably successful in achieving this goal, though as we'll see later, it's also created some new challenges.
A brief history of the State Pension
The UK state pension was first introduced on January 1, 1909, following the Old Age Pensions Act of 1908. Back then, it provided just 5 shillings per week (equivalent to £0.25) to people aged 70 and over, and it was means-tested – only those with very low incomes qualified.
Over the following century, the system evolved dramatically. The pension age was gradually reduced to 65 (and 60 for women), the contributory system based on National Insurance was introduced, and additional earnings-related elements were added and reformed multiple times.
The most recent major overhaul came in April 2016, when the "new state pension" was introduced. This replaced the old two-tier system (basic state pension plus additional state pension) with a single, simpler flat-rate payment. The starting rate was £155.65 per week – compare that to the £241.30 it will be in April 2026, and you can see the substantial growth that's occurred in just ten years.
That growth is largely thanks to the triple lock. Since 2016, the state pension has increased by 55% – that's £85.65 more per week than when the new system started. Over the same period, general inflation was only about 35%, meaning pensioners have seen real improvements in their purchasing power, not just keeping pace with rising prices.
Looking at the specific increases year by year tells an interesting story. In normal economic times, increases tended to be modest – around 2.5% to 4%. But the last few years have been anything but normal. In 2023, during the energy crisis and post-pandemic inflation spike, the state pension rose by an extraordinary 10.1% – the highest increase in the triple lock's history. This was followed by another substantial 8.5% rise in 2024. Now, as the economy normalizes, we're seeing more moderate (but still healthy) increases of 4.1% in 2025 and 4.8% in 2026.
How does the State Pension increase compare to the rising cost of living?
It's generally positive. September 2025's inflation figure was 3.8%, which means the 4.8% pension increase is running a full percentage point ahead of general inflation. In real terms, this means your pension will buy you about 1% more in goods and services than it did before, representing a genuine increase in your living standards, not just keeping you in the same place.
This is particularly welcome news after the difficult years of 2022-2023, when energy prices soared and inflation reached double digits. Those were challenging times for everyone, but especially for pensioners on fixed incomes. The triple lock proved its worth during that period, ensuring that pensions rose by 10.1% when inflation was at its peak, providing crucial protection when it was most needed.
However, it's important to note that general inflation figures don't always reflect the specific costs that matter most to pensioners. Energy bills, for instance, tend to represent a larger proportion of pensioners' spending than for younger households. While energy costs have moderated from their peak, they remain significantly higher than pre-crisis levels. Similarly, food inflation has at times run ahead of general inflation, directly impacting everyone's weekly shopping bills.
Healthcare costs also tend to rise faster than general inflation and become increasingly relevant as people age. While the NHS remains free at point of use, many health-related expenses – prescription costs for those not exempt, over-the-counter medications, mobility aids, and extra heating for health reasons, can add up.
Since 2016, pensioners have seen their state pension increase by 55% while inflation has risen by about 35%. That's a real-terms increase of approximately 15% over the decade.
Will the State Pension affect my tax bill?
This depends on your "personal allowance", which is the amount of income you can receive each year without paying any income tax. For most people, including pensioners, this personal allowance is currently £12,570. Any income above this threshold is subject to income tax at 20% (or higher rates if your total income exceeds £50,270).
The critical issue with this rise is the full new state pension from April 2026 will be £12,547.60 annually. That's just £22.40 below the personal allowance. So for the first time you're within touching distance of the tax threshold.
For pensioners with only state pension income: If you're currently receiving only the full state pension and nothing else, you won't pay tax in 2026-27. You'll be £22.40 under the threshold. However, look ahead to April 2027. If the state pension rises by even the minimum 2.5%, it will reach approximately £12,861 – comfortably over the personal allowance, which is still frozen. For the first time, pensioners receiving only the state pension would become taxpayers. The amount of tax would be relatively small initially (about £58 per year on the £291 excess), but it represents a significant psychological and administrative shift for people who may never have dealt with tax matters before.
For pensioners with additional income: If you receive the state pension plus a workplace pension, personal pension, or other income sources, you're much more likely to already be paying tax or to be pushed over the threshold by the combination. Let's say you have a modest workplace pension of £5,000 per year. In 2025-26, your total income would be £16,973 – that's £4,403 over the personal allowance, resulting in an income tax bill of £881. In 2026-27, with the state pension increase, your tax bill would rise to about £995, an increase of £114. So while you're receiving £574.60 more in state pension, you're paying £114 more in tax, leaving you with a net gain of about £460.
The tax impact becomes even more significant for those with more substantial additional income. Someone with £10,000 of other income (in addition to state pension) would effectively see only about a 2.3% increase in their take-home income after tax, not the headline 4.8%. This "fiscal drag", where rising incomes pull people into higher tax brackets or increase their taxable income without the tax thresholds rising, has become a significant issue in recent times.
As mentioned above the problem is compounded by the fact that the personal allowance has been frozen since 2021 and is not scheduled to rise again until 2028 (and there's speculation it might be frozen even longer, until 2030). While the state pension rises every year through the triple lock, the tax-free threshold stays put causing an inevitable collision.
According to current projections, 8.7 million pensioners over state pension age are paying income tax in 2025-26, with an additional 420,000 joining them compared to the previous year. More than one in five pensioners now have state pensions that exceed the personal allowance – typically because they deferred claiming their pension (which increases the payment), or because they have substantial amounts of additional state pension from the old SERPS or State Second Pension schemes.
If you don't have any other PAYE income (like a workplace pension), HMRC will likely contact you through what's called a "simple assessment", essentially asking you to pay the tax due. For many pensioners who've never had to engage with the tax system, this administrative process can be confusing or stressful.
If you do have other PAYE income, HMRC will typically adjust your tax code automatically to collect the tax due on your state pension, but this will reduce your take-home income from your other pension sources, which might not be immediately obvious.
Will the Government address the Pension rise in the Budget?
The upcoming UK Budget in November could seek to address the conflicting path of the state pension and the tax-free personal allowance.
there are several options, though none of them politically easy:
- Unfreeze the personal allowance: This would prevent pensioners becoming taxpayers but would cost the Treasury billions in lost tax revenue at a time when public finances are already stretched.
- Create a specific pensioner's allowance: The Conservative Party proposed this before the 2024 election (dubbed the "triple lock plus"), suggesting the personal allowance for pensioners should rise in line with the state pension. Labour rejected this proposal, but pressure for something similar may build.
- Reform the triple lock: Various experts have proposed alternatives, such as linking the pension to a fixed proportion of average earnings with temporary inflation protection, or removing the 2.5% minimum floor. However, any reform that appears to reduce pensioner benefits carries enormous political risk.
- Accept that state pension exceeds the personal allowance: Simply allow the situation to unfold, with pensioners on state pension alone paying modest amounts of tax. This is administratively complex and politically controversial but may be the path of least resistance.
Can the UK Budget sustain State Pension rises like this?
The UK's population is aging rapidly. There are currently about 12.4 million people over state pension age, and this number is projected to reach 16 million by 2040. The state pension is already the largest single item of welfare spending at around £125 billion annually, and this will only grow.
The ratio of workers to pensioners is declining, from about 3.2 working-age people for every pensioner today to a projected 2.5 by 2050. This demographic shift places increasing pressure on the system, leading to debates about whether the triple lock can be sustained indefinitely and whether the state pension age needs to rise further.
The government has launched a review of the state pension age, which will consider whether and when it should increase to 68 and beyond. Current plans already see it rising to 67 between 2026 and 2028. Future increases are likely to be tied to life expectancy increases, with the principle being that people should spend a fixed proportion of their adult life in retirement.
These are complex policy questions without easy answers. The triple lock has proven enormously successful in protecting pensioners and reducing elderly poverty, but it operates in a context of demographic change and fiscal constraints that can't be ignored. Future governments will need to navigate these challenges carefully, balancing the needs of current pensioners, future pensioners, working-age people, and overall fiscal sustainability.
I'm a pensioner and worried about paying tax on my income, what do I do?
- Check your state pension forecast: You can get a personalized state pension statement through the government's online service at gov.uk/check-state-pension. This shows what you're likely to receive based on your National Insurance record and helps with financial planning.
- Budget for potential tax: If you have additional income beyond state pension, factor in the tax implications of the increase. Your take-home benefit will be less than the headline figure. Consider adjusting any monthly budgets accordingly.
- Review your tax code: If you have other PAYE income, check that your tax code is correct. HMRC should adjust it to account for your state pension, but mistakes can happen. If your code seems wrong, contact HMRC to correct it.
- Consider Marriage Allowance: If you're married or in a civil partnership and one of you has income below the personal allowance while the other pays tax, you can transfer 10% of the unused allowance (worth £252 in tax saving). This becomes increasingly relevant as state pension approaches the personal allowance.
- Plan for April 2027: If you're currently receiving only state pension and are close to the personal allowance, start preparing now for the likelihood that you'll become a taxpayer in April 2027. Understand how tax will be collected (probably through simple assessment) and what this process involves.
- Don't forget about Pension Credit: If your income is low, you might be eligible for Pension Credit, which tops up your income to a minimum level (currently £218.15 per week for single people). Pension Credit also provides access to other benefits like help with housing costs, council tax reduction, and free TV licenses for over-75s. However, as your state pension rises, you might lose eligibility for Pension Credit, potentially creating a "cliff edge" where you lose more in benefits than you gain in pension. Check your position carefully.
- Review your overall retirement income: Use the pension increase as a prompt to review your entire retirement financial picture. Are you making the most of your savings? Are there other benefits you're entitled to? Is your spending plan sustainable? Consider speaking with a financial adviser if you have complex circumstances or significant assets.