Martin Lewis: The Chancellor confirms those who only get State Pension WON'T pay income tax on it this Parliament

ITV's The Martin Lewis Money Show Live – Thursday 27 November

From The Martin Lewis Money Show Live on Thursday 27 November 2025 courtesy of ITV. All rights reserved. Watch the full episode on ITVX.

Martin: 'It's really good to have clarity that they won't pay tax'

Below is a transcript of Martin's discussion with the Chancellor Rachel Reeves:

Martin Lewis: "I'm going to start, if that's okay, with Rebecca, who says: 'Does my 85-year-old father who's living with dementia now have to complete a tax return as his State Pension will take him over the personal allowance?'."

The Chancellor Rachel Reeves: "So if you just have a State Pension, you don't have any other pension, we are not going to make you fill in a tax return."

Martin: "Of any type?" 

The Chancellor: "Yes. And so I make that commitment for this Parliament. You're right, 2027 looks like the time that it will cross over. We are working on a solution, as we speak, to ensure that we're not going after tiny amounts of money."

Martin: "But people will have to pay the tax. They just won't have to do a return? Or will they not have to pay the tax?"

The Chancellor: "In this Parliament, they won't have to pay the tax."

Martin: "Okay."

The Chancellor: "You know, further out, I'm not about to make any commitments on that. But we're just looking at a simple workaround at the moment."

Martin: "Okay. So I hadn't actually got that from the Budget. So that's really good to have clarity that they won't be paying the tax."

Martin had warned that 'many' would need to pay tax on State Pensions in 2027

During the Autumn Budget, the Chancellor Rachel Reeves confirmed that around 13 million pensioners will see an above-inflation rise to the State Pension next April, with both the new and old (basic) State Pension rising in line with average wage growth between May and July – which stands at 4.8%.

This uplift comes under the so-called 'triple lock', which guarantees that the State Pension increases annually by the highest of September's Consumer Prices Index (CPI) figure (which stood at 3.8%), or average earnings growth between May and July, or 2.5%.

But this uplift brings the State Pension very close to the current tax-free personal allowance (the amount earnable each year before you pay tax) of £12,570 a year. And as it must rise by at least 2.5% each year, it would mean that from April 2027, someone whose only income is the full new State Pension would earn more than personal allowance – so tax would therefore be due.