State Pension and Tax: Martin Lewis Warns of April 2027 Tipping Point
Martin Lewis, the founder of MoneySavingExpert.com and leading UK finance expert, has issued a critical alert regarding the future tax burden on recipients of the UK’s State Pension. The warning is directly related to the government’s commitment to the triple lock guarantee combined with the continuous freeze on the Income Tax Personal Allowance.
The Triple Lock vs. The Frozen Allowance
The core of Lewis’s concern lies in the growing disparity between the rising State Pension and the static tax threshold.
- Triple Lock Guarantee: This policy dictates that the State Pension rises each April by the highest of: average wage growth (May-July), September’s inflation (CPI), or 2.5%. For the April 2026 rise, the triple lock is expected to increase the State Pension by 4.8% (based on the average wage growth figure announced in September 2025). This will push the full new State Pension to approximately £12,548 annually.
- Frozen Personal Allowance: The amount a person can earn tax-free, the Personal Allowance, has been frozen at £12,570 until April 2028.
As the State Pension rises under the triple lock, the annual amount is closing the gap on the frozen £12,570 tax-free allowance.
The Tax Tipping Point: April 2027
Lewis points out that while the expected 2026/27 full new State Pension of £12,548 is still technically below the £12,570 Personal Allowance (meaning a person with only the State Pension will not pay tax in 2026/27), the situation is set to change dramatically the following year.
- April 2027: The State Pension will rise again by a minimum of 2.5% (the triple lock floor). This guaranteed rise will undoubtedly push the annual State Pension amount above the frozen £12,570 threshold.
- The Consequence: For the first time, people whose only income is the full new State Pension will be pushed into the income tax bracket. They will have to pay tax on the portion of their State Pension that exceeds the Personal Allowance.
This situation affects those on the full New State Pension, and will also capture more retirees on the Old State Pension who have other small sources of income (like a workplace pension or savings interest) that previously fell within the Personal Allowance.
Martin Lewis’s Advice
Lewis has long campaigned for the government to address this anomaly. His key advice for retirees and those approaching State Pension age is to:
- Be Aware: Understand that the State Pension is taxable income, unlike ISA interest.
- Factor in Tax: If you have other income, the State Pension is added to it, and any total above £12,570 is taxable at your marginal rate (typically 20%).
- Future Planning: Those due to retire soon should factor in this inevitable tax payment from April 2027 onwards, as it will reduce their net income.
The combination of the triple lock and the frozen allowance creates a significant “stealth tax” on pensioners, pulling millions of low-income retirees into the tax net for the first time.
