The Workers Rights 
The UK State Pension is set for its largest rise in years, with £500 expected to be added to the total annual payment by 2027/28, which would push the full new State Pension into the income tax bracket for the first time. This means good news for some retirees, but bad news for others, since it raises the question: Will you owe tax on your pension income next year?
Quick Facts
| Detail | Figure |
| A forecast figure for the new State Pension (2027/28) | £13,062/year |
| This is the current new State Pension (2026/27). | £12,547/year |
| Projected rise | ~£515/year (~4.1%) |
| Basic State Pension (projected) | £10,010/year |
| This is free of tax. | £12,570 (frozen since 2021) |
| Triple lock guarantee | Higher of: wages, inflation, or 2.5% |
| Estimated pensioners who are affected by the tax threshold. | ~1.1 million households |
Why Is the UK State Pension Rising by £500?
The reason is the triple lock, which was introduced in 2012 and raises the UK State Pension by the highest of the three: wage growth, inflation or 2.5% each April.
Recent wage growth data of 4.1% and inflation of 2.6% make wage growth the likely determining factor for 2027/28. This would be the fourth year in a row in which the pension has increased in step with earnings, putting the new State Pension pot more than 80% higher than the previous year since the introduction of the triple lock.
For retirees, the new uplift rate will mean that the full new state pension will increase from £12,547 to £13,062 per year, while the basic rate will rise from £9,615 to £10,010 per year.
The Tax Threshold Problem: A Double-Edged Rise
Here’s the catch. The sum of income you can earn without income tax has been capped at £12,570 from 2021 onwards, and no plans are currently in the works to increase this sum before 2028 at the latest.
If the full new State Pension becomes more than £12,570, then those receiving it as their only or main income may be liable to income tax on the excess. However, based on current projections, that would be about £492 per year, which would leave pensioners liable to pay approximately £98 in income tax (at 20% basic rate) on some of their pension income.
State Pension vs. Tax Threshold: A Comparison
| Year | Full New State Pension | Personal Allowance | Gap |
| 2024/25 | £11,502 | £12,570 | -£1,068 (below threshold) |
| 2025/26 | £11,973 | £12,570 | -£597 (below threshold) |
| 2026/27 | £12,547 | £12,570 | -£23 (just below) |
| 2027/28 (projected) | £13,062 | £12,570 | +£492 (above threshold) |
This table should make it clear that the frozen personal allowance and the increasing State Pension rate 2027/28 are colliding, with the year 2027 when they will finally cross.
Are Pensioners Actually Going to Pay Tax?
Not necessarily, at least not those who rely solely on income from the UK State Pension.
The government has announced that pensioners earning only the top or basic rate of the new and basic State Pension will not pay income tax, fulfilling a promise made in the budget for 2025. The Chancellor has also announced that this exemption will continue.
However, there is still no clarity about how this exemption will be provided, and this has left pension experts worried. Retirees who have any other source of income (for example, a workplace pension, rental income or interest in their savings) should be aware that the amount of income received may put them in the taxable bracket.
What This Means for UK Retirees
- If you are only receiving the State Pension: You should be exempt from income tax under the Government’s commitment to not tax it.
- If you do have extra income: Review your overall retirement income with the £12,570 limit. Any additional income – such as a small private pension, bank interest, etc.- may be subject to part of your income tax bill.
- If you are receiving pension credit or benefits: These are worked out on their own and may not be impacted, but you should check with the pension authority concerned.
But the overall situation is still uncertain. An inflation-busting £500 pension rise is good news, but the UK State Pension, even at £13,062 a year, is still not enough for a comfortable retirement for most people, experts say.
FAQs: UK State Pension 2027
How much will the State Pension increase in 2027?
Based on the Government’s foreseeable wage increases of 4.1%, the full new State Pension will increase by approximately £515 to £13,062 per year.
Will the State Pension be taxed in 2027?
The projected amount (£13,062) is indeed more than the personal allowance (£12,570), but the government has committed to pensioners not paying income tax if that is all their income is.
What is the triple lock pension increase?
The triple lock ensures that the UK State Pension increases annually by whichever is highest of: the average wage increase, inflation, or 2.5%. It is the current policy since 2012.
How much will the State Pension be in 2026/27?
The full new State Pension is now £12,547 a year (around £241.75 a week), and the basic State Pension is £9,615 a year.
How much is the personal allowance for pensioners?
No taxes will be due on earnings below £12,570 (personal allowance) and it makes no difference whether you are a pensioner or not. The personal allowance has been kept the same since 2021.
Will there be any effect of the triple lock after 2027?
The Government has agreed to continue the triple lock for the rest of the current Parliament but has not confirmed it for the long term.
Key Takeaways
- UK State Pension should increase by ~£500 in April 2027 as a result of wage growth under the triple lock.
- The new State Pension for the first time is likely to be worth more than the £12,570 bare standard personal allowance.
- Under a government commitment, pensioners who receive no other income will not have their pension taxed, although the means of delivering this is not yet clear.
- Any retirees who have more income should look at their picture of retirement income in the UK now to prevent any tax bills being caught off-guard.
- Although this is positive, many of the rises will still leave those on the full new State Pension paying only for basic living costs.
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