State pensioners given 1 more year of tax-free pension payments and £575 boost

New state pensioners will be able to avoid paying tax on their DWP benefit for one more year - assuming they have no other forms of income - thanks to an HMRC rule.

From April 2026, new state pensioners are set to receive another bumper uplift to their state pension payments, in the form of a £575 annual boost.

That's because the Triple Lock forecasts show that right now, the benefit is set to increase by 4.8% next year. The DWP has to increase the amount paid to those who receive the state pension each year thanks to the 'Triple Lock' system, which enshrines in law that everyone who is eligible for the handout from the Department of Work and Pensions must see an increase each year, either level with inflation, wage growth or by 2.5%, whichever is highest. The current figures of 4.8% wage growth mean this is the metric which will be used to determine the increase.

Many people mistakenly believe that state pensioners do not pay tax, or do not pay tax on the state pension. Neither are true. State pensioners are - and have always been - liable to pay Income Tax on their state pension. However, this tax will only apply to those who are earning above the £12,570 Personal Allowance Threshold.

Right now, the full state pension is set at £11,973 per year, so a 4.8% increase would add £575 per year to pensions, taking the weekly payments from their current £230.25 per week to about £241 per week.

Because HMRC assumes one week of state pension payments is at the old rate, and 51 weeks of state pension payments are at the new rate, it means state pensioners with a full new state pension will receive £12,548 in the financial year, according to HMRC - a whisker under the £12,570 threshold.

It means those with no other income at all - whether work income or savings interest above £1,000 - will not lose any of their state pension to tax in 2026. Instead, the next Triple Lock boost for April 2027 would be the one that would incur some tax.

Of course, as Martin Lewis has previously pointed out, even when state pensioners pay tax, they will still come out ahead because you only lose 20p in every £1, keeping the other 80p extra - 'you earn more, you get more'.

Martin Lewis explained via his MSE website: "The State Pension is set to rise 4.7% [now 4.8%] next April. We know this as it is 'triple locked' - i.e. it rises by the higher of 2.5% or inflation or the rise in average earnings. The key figure has just come in for earnings to July and it's likely to be the highest of the three, at 4.7% [now 4.8%].

"So based on that, the FULL State Pension (for someone with all the qualifying National Insurance years) is set to rise from: NEW state pension: £230.25 to £241.05 a week [now £241.30]. OLD state pension (retirees pre-April 2016): £176.45 to £184.75 a week [now £184.90].

"This will take someone on the full new State Pension to £12,535 a year [now £12,548], only £35 [now £22] below the frozen personal allowance (amount you can earn tax-free each year).

"So as State Pension income is taxable, that means without any question the following year (unless something changes), those on the full new State Pension with no other income will for the first time pay tax on it (as it will rise a minimum 2.5% and personal allowances are frozen)."

The reason the amount falls just below the £12,570 Income Tax threshold is because HMRC calculates the pension income as 51 weeks at the new rate, and one week at the old rate.

HMRC told MSE: "We calculate how much State Pension an individual accrues each year by calculating one week at the old rate of State Pension and 51 weeks at the new rate."

MSE adds: "Presuming the 4.8% increase goes ahead as expected, this would result in an annual taxable amount of £12,536.55 for 2026/27 - meaning those who only get the full new State Pension (and have no other income) WON'T pay income tax on it next year."

However, this will change in 2027 when the next Triple Lock rise adds more to pension incomes and pushes new state pensioners over the threshold.