Budget 2025 says pensioners with only the State Pension will be exempt from Simple Assessment from 2027-28.
Why it matters: The change would spare some retirees from small HMRC tax demands as the State Pension rises and the personal allowance stays frozen. It cuts admin for HMRC and for pensioners who have no other income to offset the bill.
- Budget 2025 says people whose only income is the basic or new State Pension will not pay small amounts of tax via Simple Assessment from 2027-28.
- The full new State Pension is £241.30 a week in 2026-27, and a 3.9% uplift would take it to about £13,000 a year.
- The personal allowance is £12,570, so a pension at that level would sit above the tax-free threshold.
- ONS said average weekly earnings rose 3.9% in the three months to July 2026, the key input if earnings stay the highest triple-lock measure.
Budget 2025 says pensioners whose only income is the basic or new State Pension will be taken out of Simple Assessment tax bills from 2027-28. The measure is meant to reduce the administrative burden on people who would otherwise receive small tax demands as the pension rises.
The trigger is the latest pay data. The ONS said average weekly earnings in Great Britain rose 3.9% in the three months to July 2026. Under the triple lock, the State Pension rises each April by the highest of earnings growth, inflation or 2.5%.
That matters because the full new State Pension is £241.30 a week in 2026-27, according to GOV.UK. If earnings remain the highest measure, a 3.9% uplift would put the pension at about £13,000 a year, above the £12,570 personal allowance.
HMRC says the State Pension is taxable income, but if it is a person's only income it is usually paid without tax deducted and HMRC writes to them if tax is due. The HMRC guidance also notes that tax is collected through Simple Assessment when no tax is taken at source.
The House of Commons Library says pensioners whose only income is the state pension generally do not pay income tax in practice, but more could start owing small amounts as pensions rise and the allowance stays frozen. The Commons Library briefing says the policy change is aimed at those most likely to be caught by that gap - retirees with no private pension, earnings or savings income to offset the bill.
By the numbers
- £12,570 - current personal allowance
- £241.30 a week - full new State Pension in 2026-27
- 3.9% - ONS earnings growth in the three months to July 2026
Yes, but: The change affects the collection method, not whether the State Pension is taxable income. It also depends on implementation from 2027-28, as set out in Budget 2025.
What's next: The exemption is scheduled to start in 2027-28, subject to implementation.