Source: MoneySavingExpert, “Budget 2026: State Pensioners with incomes under £13,037 a year to pay no Income Tax as new allowance introduced”, published 28 October 2026. The mechanism is confirmed directly on GOV.UK: “Budget 2026: Breathing space for today, hope for the future”. Personal Allowance and current State Pension figures are checked against GOV.UK: Income Tax rates and Personal Allowances and GOV.UK: the new State Pension – what you'll get, both checked 30 October 2026.
Our view
In September, we wrote about a gap nobody had actually closed: the frozen £12,570 Personal Allowance was about to sit below the State Pension for the first time, and the government's existing promise — no tax chasing for pensioners living on the State Pension alone — only reached, on LCP's analysis, around one pensioner in sixteen. We said: read the detail before next April.
The Budget has now supplied that detail, and it's more generous than the group we described in September. The new Pension Tax Allowance (PTA) doesn't only cover people with no other income — GOV.UK's own wording covers anyone above State Pension age whose total income, from any source, sits at or below the value of the new State Pension. The government expects 500,000 pensioners to benefit and 290,000 to pay no Income Tax at all as a result — a much wider reach than the "one in sixteen" the September pledge implied. It isn't the whole fix a sceptic might want — the saving is capped at roughly £94 a year, and the mechanics of how it lands on your tax code aren't published yet — but the direction is the right one, and broader than we expected in September.
What was actually announced
From April 2027, people above State Pension age whose total income is at or below the value of the full new State Pension will not pay Income Tax on it, through the new Pension Tax Allowance. MoneySavingExpert's reporting puts the relevant threshold at £13,037 a year — the Budget's own figure for where the full new State Pension is heading, confirming what our September piece projected from wage-growth data (we had it at £13,036.40, near enough the same number). That sits £467 above the frozen £12,570 Personal Allowance, which is the gap the PTA exists to cover.
Today, the full new State Pension is £241.30 a week — £12,547.60 a year — still just under the Personal Allowance. The rise that takes it to roughly £13,037 from April 2027 is what creates the gap, and the PTA is the government's answer to it.
Illustrative figures, using GOV.UK's current 2026-27 rates and MoneySavingExpert's reported Budget figures for April 2027.
- Income from April 2027: about £13,037 a year (State Pension only).
- Standard Personal Allowance: £12,570 — frozen until 2031.
- Gap the PTA covers: about £467.
- Tax that would be owed without the PTA: £467 × 20% = £93.40 a year — close to MoneySavingExpert's “up to £94” figure.
- Tax owed with the PTA from April 2027: £0.
To put £94 a year in context against a real household bill: Ofgem's current dual-fuel price cap works out at £1,723 a year, £33.13 a week. £94 is just under three weeks of a typical energy bill — not life-changing, but not nothing for a household on the State Pension alone, where every regular outgoing is already budgeted to the pound.
Who this actually reaches
This is the part that's changed most since September. The original Budget 2025 pledge was narrow by design: it protected people whose only income was the State Pension from tax admin, and LCP's analysis suggested that covered roughly one pensioner in sixteen — everyone else, with a workplace pension, savings interest or part-time earnings on top, was already above the threshold and already in the tax system regardless. GOV.UK's confirmed wording for the PTA doesn't repeat that "only income" restriction: it covers total income from any source, up to the threshold. A pensioner with the State Pension plus a small annuity or a few hundred pounds of savings interest, provided the total stays at or below roughly £13,037, appears to qualify on the same terms as someone with no other income at all. That's a meaningfully wider group than the one we described in September, which is why the government's own estimate — 500,000 people, 290,000 paying no tax — is so much larger than LCP's "one in sixteen" reading of the earlier promise.
It isn't unlimited, though. The saving tops out at around £94 a year because the PTA only covers the fixed £467 gap between the two allowances — it doesn't shield any income above roughly £13,037 from tax. A pensioner with the State Pension plus a £4,000-a-year workplace pension is still taxed in the ordinary way on everything above their allowance; the PTA doesn't follow them up the income scale.
What it means for you this week
If you're above State Pension age and your only income is the State Pension, or close to it, this is good news that doesn't require you to do anything yet. Nothing changes this winter, this tax year, or in your current tax code — the PTA starts in April 2027, and HMRC has not yet published how it will show up on a tax code or Self Assessment return. There's nothing to claim and nothing to apply for in advance.
If your income already includes a private or workplace pension, savings interest, or part-time earnings that take your total comfortably above roughly £13,037, this doesn't change your position: you're already paying tax on income above your allowance, exactly as before, and the PTA's £467 cushion isn't designed to reach that far up the income scale.
One thing to do this week
- Check your actual State Pension figure. The averages in the news — £13,037, or our September projection of £13,036.40 — are national figures for the full new State Pension. Your own number depends on your National Insurance record, and some people get less than the full rate. Get your real forecast at gov.uk/check-state-pension — it takes about ten minutes and shows whether you're on the new or old basic rate.
What is still uncertain
The policy is confirmed; the plumbing isn't. HMRC hasn't yet published the coding guidance that explains exactly how the Pension Tax Allowance will appear on a PAYE tax code or a Self Assessment return from April 2027, or how it interacts with other allowances some pensioners also claim, such as Marriage Allowance or Blind Person's Allowance. It's also not yet clear whether the allowance is withdrawn gradually for anyone who edges just over the roughly £13,037 threshold, or whether it simply stops applying above that point. We'd expect HMRC to publish that detail ahead of the April 2027 tax year, and we'll update this piece when it does.
Our September piece on the State Pension crossing the tax line has the fuller background on how the gap opened up, and our guide to checking your tax code explains how any change like this usually shows up in practice.