Will I be taxed on my state pension next year? What we know so far

Will I be taxed on my state pension next year? What we know so far The full new state pension is currently worth £12,547.60 a year - which is just below the £12,570 personal allowance The state pension is set to bust the tax-free personal allowance next year, meaning retirees face a tax bill unless they are exempt by the government. The full new state pension is currently worth £12,547.60 a year - which is just below the £12,570 personal allowance. The personal allowance has been frozen since 2021. The government has pledged that pensioners whose only income is the state pension will not pay income tax - but there are fears that this may not apply if someone receives additional amounts to their state pension. State pension explained There are two different types of state pension. You get the new state pension if you're a man born on or after April 6, 1951, or if you're a woman born on or after April 6, 1953. This is worth £241.30 a week if you get the full amount, or £12,547.60 a year. But if you were born before these dates, you will claim the old basic state pension. This is worth £184.90 a week if you get the full amount, or £9,614.80 a year. You may receive less than these amounts depending on your National Insurance record. How much could the state pension rise by next year? The triple lock guarantees the state pension rises every April by whichever is higher out of inflation (using the previous September inflation figure), wages (average growth between May and July) or 2.5%. The latest figures from the Office for National Statistics show average growth, including bonuses, fell to 4.1% in the three months to June. This means unless inflation rises sharply, wage growth is likely to be used to determine the state pension next April. If the next earnings growth figures remain unchanged, an increase of 4.1% would add more than £500 a year to the new state pension. Will you be hit with a tax bill? The Treasury has said that people whose only income is the state pension "without any increments" will not have to pay income tax next year. While the government has not yet officially spelled out exactly what this means, speculation is rife that this could mean people who receive a higher state pension amount may be hit with a small tax bill. This could include those who deferred their claim or receive additional state pension top-ups, though again, this has not yet been confirmed yet by the Treasury. You currently get an extra 5.8% added to your state pension for each year you defer receiving your payments. You have to apply to claim your state pension - it does not start automatically. Even those on the smaller basic state pension could face paying tax. Those who get the basic state pension get a bigger boost of 10.4% for every year they defer, or a lump sum plus interest. They may also receive SERPS or the State Second Pension, which is extra money on top of the basic state pension. Both schemes are now closed but those in receipt of them continue to get the extra amounts. Sarah Coles, head of personal finance at AJ Bell, said: “The government stated that this will apply to people whose sole income is the state pension, but it wasn’t clear what else would be counted as income – let alone whether it would include income within tax allowances, tax-free income or those state pension increments, such as deferred state pension income or SERPS. “We are yet to see any more details, and under the new Burnham administration this policy remains mired in uncertainty. Pensioners within this group are naturally starting to ask questions, but time will tell how the proposals shape up and whether they’ll actually make pensioners’ lives simpler.” What does the government say? A Treasury spokesperson said: “Pensioners whose only income is the full new or basic State Pension without any increments will not pay income tax and we are committed to that over this Parliament. “By keeping the Triple Lock, 12 million pensioners will see their income rise by up to £470 this year, and they continue to benefit from one of the most generous Personal Allowances in the G7.”