According to Rachel Reeves, there is a "workaround" for retirees who have a state pension tax bill

The government has stated that anyone receiving only a state pension will not be required to pay income tax on the payment until the end of this parliament, as the full new state pension is expected to surpass the tax-free personal allowance within years

Chancellor Rachel Reeves has stated that pensioners whose only source of income is the state pension will not be required to pay income tax on it until the end of this parliament.

Under the triple lock mechanism, the total new state pension is anticipated to increase to at least 12,862 starting in April 2027.

Due to wage increases of 4.8 percent starting in April 2026, it will rise from 11,973 annually to 12,547. The following April, it will increase by at least 2.5 percent, reaching at least 12,862.

The personal allowance threshold, which is set at 12,570 until 2031, would then be exceeded by someone in this situation who is only receiving the state pension. They would typically have to pay about 58 in taxes.

But the chancellor has now stated that in 2027 - 2028 and the next two fiscal years, HMRC will not collect taxes from individuals in this circumstance.

The government stated in the 2025 Autumn Budget that individuals whose only source of income is the basic or new state pension without any increases would not be required to pay "small amounts of tax" through this mechanism. Normally, this would be collected through simple assessment. Next year, there will be more specifics.

Reeves stated that the government was considering a "simple workaround" to prevent state pensioners from paying tiny amounts of tax to HMRC in an interview on Thursday, November 27, on ITV's The Martin Lewis Money Show Live.

"If you only have a state pension and no other pension, we won't require you to file a tax return," she stated. A "

The chancellor responded, "In this parliament, they won't have to pay the tax," when asked if this meant that the same state pensioners would have to pay any taxes. The "

BFIA requested comments from the Treasury.

People whose only source of income is the state pension have expressed concern because they are forced to pay income tax due to frozen thresholds and rising payments as a result of the triple lock.

Due to rising wages, a phenomenon called fiscal drag is forcing millions of taxpayers to pay higher income taxes.

Pensioners will be "breathing a sigh of relief" over the chancellor's announcement, according to Helen Morrissey, head of retirement analysis at financial services firm Hargreaves Lansdown.

However, Steve Webb, a former pensions minister who is currently a partner at the consulting firm LCP, questioned whether pre-retiree workers, those with private pensions, and those on the basic state pension receiving additional amounts would be exempt from income tax if their incomes slightly exceeded the personal allowance threshold.

"There is no costing for this policy in the Budget documents, which suggests that it is still very much an idea rather than a firm plan," he stated.

However, the Treasury will have a very hard time coming up with a practical and equitable solution. The "

How retirees can avoid paying income tax.

According to HMRC, 8.3 million people of state pension age paid taxes in 2024 - 2025, up from 7.83 million in 2023 - 2024.

There are steps you can take to lower your tax liability if you're one of the millions of retirees who already pay income tax.

First, Morrissey advised making the most of your tax-free lump sum, which is equal to 25% of your pension pot or up to £268,275 in total.

Second, try to withdraw a sum from your pot that won't put you in a higher tax bracket if you plan to do so through drawdown.

For instance, you wouldn't want to take out more than about £40,000 if you were on a full new state pension (currently £11,973 annually) and only took it out once a year. If you did, you would be placed in the higher rate tax bracket due to your lack of income.

Making the most of your ISA allowances is also crucial because any interest you earn there is tax free. Currently, you can contribute up to £20,000 to any number of ISAs during a tax year.

In order to lower your total income for that tax year, you can also postpone receiving your state pension. The amount you receive increases when you eventually come to receive your state pension after deferring. It will increase by slightly less than 5.8% for each 52 weeks that you postpone reaching state pension age on or after April 6, 2016, as long as you postpone for at least nine weeks.

However, Morrisey cautioned: "You should be mindful that the increased amount may also affect your tax liability when you come to receive your state pension. A "