The Short Answer
Yes. The State Pension is taxable income. It counts towards your total income for the year in the same way as wages or a private pension, and if that total is more than your Personal Allowance of £12,570, you pay Income Tax on the excess.
What confuses people is that no tax is ever taken from the State Pension itself. The Department for Work and Pensions (DWP) pays it in full. HMRC then collects whatever is due from somewhere else: your private pension, your wages, a tax return, or a bill in the post.
So the honest answer to "do I pay tax on my State Pension?" is that you might, and if you do, it will not look like it. This guide explains where the tax turns up, with figures for 2026/27 and the changes coming in April 2027.
State Pension Figures for 2026/27 and 2027/28
| 2026/27 | 2027/28 | |
|---|---|---|
| Full new State Pension, per week | £241.30 | £250.70 |
| Full new State Pension, per year | £12,547.60 | £13,036.40 |
| Full basic State Pension (reached pension age before 6 April 2016), per week | £184.90 | To be confirmed |
| Personal Allowance | £12,570 | £12,570 |
| Gap between full new State Pension and the allowance | £22.40 under | £466.40 over |
Someone whose only income in 2026/27 is the full new State Pension pays no tax, with £22.40 to spare. That changes next year, which we come to below.
Plenty of people already receive more than £12,570 from the state. Anyone who built up Additional State Pension (SERPS or the State Second Pension) under the old system, or who has a protected payment on top of the new State Pension, or who deferred their claim, can have a State Pension well above the allowance.
Why It Is Taxable but Paid Gross
The State Pension is taxed under the pension income rules in the Income Tax (Earnings and Pensions) Act 2003. DWP has never operated PAYE on it, so there is no payroll to deduct anything.
In our view this single design choice causes most of the trouble. People see a State Pension arrive untouched and a private pension arrive with what looks like far too much tax taken off, and they reasonably conclude that something has gone wrong. Usually nothing has.
The following state payments are not taxable and do not count towards your income: Pension Credit, Attendance Allowance, Personal Independence Payment, the Winter Fuel Payment and the £10 Christmas Bonus. Carer's Allowance is taxable.
How HMRC Collects the Tax
There are four routes. Which one applies depends on what else you have coming in.
Through the tax code on a private pension
This is the most common route. HMRC takes your Personal Allowance, subtracts your State Pension for the year, and gives your pension provider a tax code based on whatever allowance is left.
Alan receives the full new State Pension and a workplace pension of £9,000 a year.
| Amount | |
|---|---|
| State Pension | £12,547.60 |
| Workplace pension | £9,000.00 |
| Total income | £21,547.60 |
| Less Personal Allowance | £12,570.00 |
| Taxable income | £8,977.60 |
| Tax at 20% | £1,795.52 |
All £1,795.52 comes out of the workplace pension. Alan's code on that pension will be about 2L instead of 1257L, because the State Pension has used all but £22 of his allowance. His £750 a month arrives as roughly £600.
The tax is correct. But if Alan looks only at the workplace pension payslip, he sees 20 percent taken from nearly every pound and no allowance at all. This is the single most common query we get from newly retired clients.
If you have more than one private pension or a job as well, only one of them carries the adjustment for the State Pension. The others will usually have a BR code, which taxes everything at 20 percent.
Through a K code
When the State Pension is bigger than the Personal Allowance, there is no allowance left to give and the code turns negative. That is a K code. It tells the pension provider to add an amount to your taxable income before working out the tax.
Brenda reached State Pension age in 2012. Her basic and Additional State Pension together come to £15,600 a year, and she has a small private pension of £3,000.
| Amount | |
|---|---|
| Total income | £18,600 |
| Less Personal Allowance | £12,570 |
| Taxable income | £6,030 |
| Tax at 20% | £1,206 |
Her State Pension exceeds her allowance by £3,030, so her private pension gets a code of about K302. The provider taxes £3,000 plus £3,030 at 20 percent. Brenda pays £1,206 of tax out of a £3,000 pension, which is 40 percent of it.
Again, the total is right. There is a legal limit that stops a K code taking more than half of any single payment, so where the private pension is very small HMRC cannot collect everything this way and sends a bill for the rest.
Through Simple Assessment
If the State Pension is your only income, or there is no pension or wage that HMRC can adjust, it sends a Simple Assessment letter after the end of the tax year. This is a calculation and a bill in one. You do not fill anything in.
Derek's State Pension is £14,200 a year and he has nothing else. He owes 20 percent of £1,630, which is £326. HMRC will write to him after 5 April 2027, and the usual deadline is 31 January following the end of the tax year, or three months from the date of the letter if it is issued late.
Check the figures when the letter arrives. You have 60 days to tell HMRC if you think it is wrong.
Through Self Assessment
If you already file a Self Assessment tax return because you are self-employed, a landlord or a company director, the State Pension goes on the return and the tax is paid with everything else on 31 January.
Use the annual figure from DWP, not the total of the payments on your bank statements. The law taxes the amount that builds up during the tax year, whenever it is actually paid. The State Pension is paid four weekly in arrears and the rate changes each April, so the two figures rarely match. The letter DWP sends before each April gives the new weekly rate, and 52 times that rate is the number to use for a full year.
The same rule matters in your first year. If you reach State Pension age in early January, around 13 weeks of pension builds up before 5 April. At £241.30 a week that is about £3,137 of taxable income for the year, even if only two or three payments have reached your bank.
Still Working Past State Pension Age
There is no rule that you must stop work to claim. If you carry on, two things happen at once.
Your take home pay from the job falls. HMRC moves your allowance across to cover the State Pension, so the tax on your wages goes up.
You stop paying National Insurance. Employees pay no Class 1 contributions on earnings after State Pension age. Your employer still pays its share. If you are self-employed, Class 4 stops from the start of the tax year after your birthday. Our guide to National Insurance covers the classes.
Sunita is 66, earns £30,000 and starts her full new State Pension.
| Per year | |
|---|---|
| State Pension received | £12,547.60 |
| Extra Income Tax taken from her wages | £2,509.52 |
| National Insurance she no longer pays | £1,394.40 |
| Net improvement | £11,432.48 |
Her wages drop by about £209 a month in tax and rise by about £116 a month in saved National Insurance. She is much better off overall, but the payslip looks worse, and it helps to know that in advance. Our salary calculator will show the tax side for your own figures.
For higher earners there is a second effect. The State Pension sits on top of your salary, so if you already earn close to £50,270, some or all of it is taxed at 40 percent.
Is It Worth Deferring?
You can delay claiming. If you reached State Pension age on or after 6 April 2016, the pension grows by 1 percent for every nine weeks you wait, which is just under 5.8 percent for a full year. On the full new State Pension, a year's delay adds £13.99 a week, or about £727 a year, for life. That extra is taxable too.
The question is how long it takes to win back the year you gave up. We think the answer depends almost entirely on your tax rate now compared with later.
| Basic rate now and later | 40% now, 20% later | |
|---|---|---|
| Pension given up, after tax | £10,038 | £7,529 |
| Extra pension per year, after 20% tax | £582 | £582 |
| Years to break even | About 17 | About 13 |
These figures ignore annual increases, which apply to both sides.
For a basic rate taxpayer, 17 years from age 67 means living to 84 before deferral pays. That is close to average life expectancy, so it is roughly an even bet, and you carry the risk. We rarely suggest it.
For someone still earning more than £50,270, the case is better. Raj earns £55,000. If he claims now, he keeps £7,529 of his £12,548. If he waits a year until he has retired, the break even point is about 13 years. Deferring until the higher rate salary stops is one of the few times we think it deserves serious thought.
If you reached State Pension age before 6 April 2016, the terms are more generous: 1 percent for every five weeks, and the option of a lump sum with interest. That lump sum is taxed at the highest rate that applies to your other income and cannot push you into a higher band, so taking it in a year when your income is low can cut the tax on it considerably.
The Winter Fuel Payment and the £35,000 Line
The Winter Fuel Payment is not taxable, but since winter 2025 it has been taken back from anyone whose total income is over £35,000. Your State Pension counts towards that total. Your partner's income does not.
HMRC normally recovers it by changing your tax code, or through your tax return if you file one. So a pensioner with a State Pension of £12,500 and private pensions of £23,000 will see a further small reduction in their monthly pension. You can opt out of receiving the payment if you know you are over the limit, which saves the adjustment.
What Changes in April 2027
The full new State Pension rises to £13,036.40 for 2027/28. The Personal Allowance stays at £12,570. For the first time, a person with nothing but the full new State Pension would owe tax: £466.40 at 20 percent is £93.28.
The Budget on 28 October 2026 introduced the Pension Tax Allowance to deal with this. It is a reduction in the tax bill of up to about £94 for people over State Pension age, for the tax years 2027/28 to 2029/30. HMRC applies it automatically.
- Total income up to £13,037: the reduction wipes out the tax, and no Simple Assessment is issued.
- Total income between £13,037 and £13,319: a partial reduction, falling by £1 for every £3 of income.
- Total income of £13,319 or more: nothing.
HM Treasury's own example is Nadia, with income of £13,400. She pays £166 and gets no reduction at all.
The Treasury's explainer says plainly that the State Pension remains taxable. Almost everyone with a workplace pension on top of their State Pension is above £13,319, so for them nothing changes: the tax code on the private pension will simply be reduced a little further each April as the State Pension rises and the allowance does not. We set out the detail, and what we think of it, in our guide to the Personal Allowance.
What We Would Do
Check the State Pension figure in your tax code. HMRC gets it from DWP, but in the first year it is often an estimate. Your coding notice shows the amount deducted for State Pension. Compare it with your DWP letter. If it is too high, you are overpaying every month.
Do not assume a low code is a mistake. A code of 2L or a K code on a private pension is normal once the State Pension starts.
Claim Marriage Allowance if one of you is on the old basic State Pension. At £9,614.80 a year, that partner has allowance going spare. Transferring £1,260 of it saves the other up to £252 a year, and it can be backdated four years. Our Marriage Allowance guide has the detail.
Use the savings bands. If the State Pension is most of your income, up to £5,000 of interest can be taxed at 0 percent on top of the Personal Savings Allowance. See our guide to tax on savings interest.
Time private pension withdrawals around it. The years between stopping work and State Pension age are often low income years. Drawing taxable pension income then, while your allowance is otherwise unused, can be cheaper than drawing it later on top of the State Pension.
If you move abroad, tell HMRC. The UK State Pension can still be taxable here, in your new country, or both, depending on the tax treaty. Many treaties give the taxing right to the country you live in, but it has to be claimed.
Common Mistakes
- Thinking the State Pension is tax free because no tax is deducted. It is taxable and uses your Personal Allowance first.
- Believing your private pension is overtaxed. It is usually carrying the State Pension's tax as well as its own.
- Adding up bank payments for a tax return. Use the annual entitlement from DWP.
- Ignoring a Simple Assessment letter. It is a legal bill with a deadline, and interest runs if it is paid late.
- Expecting National Insurance to continue. It stops for employees at State Pension age. Tell your employer and check your payslip.
- Assuming the Pension Tax Allowance makes the State Pension exempt. It helps only where total income is under £13,319.
- Deferring by default. The pension you give up takes 13 to 17 years to earn back.
How IAK Can Help
We look after the tax affairs of retired clients and people approaching retirement across North London and Hertfordshire. Through our personal tax service we check tax codes, deal with Simple Assessments and Self Assessment returns, and reclaim tax overpaid in earlier years. Our tax planning work covers when to claim the State Pension, how to draw private pensions around it, and how couples can share allowances. Our guide to PAYE explains how the deductions on a pension payslip are worked out.
Call us on 020 8445 3300 or get in touch for a free initial conversation.
Sources
- Tax when you get a pension, GOV.UK, for the statement that the State Pension is taxable, that it is paid without tax deducted, and how tax is collected through a private pension, Simple Assessment or Self Assessment.
- The new State Pension: what you'll get, GOV.UK, for the full weekly rate of £241.30.
- Income Tax (Earnings and Pensions) Act 2003, section 578, for the rule that the taxable amount is the pension accruing in the tax year irrespective of when it is paid.
- Simple Assessment, GOV.UK, for payment deadlines and the 60 day window to query a calculation.
- Tax and National Insurance after State Pension age, GOV.UK, for when National Insurance contributions stop.
- Delay (defer) your State Pension, GOV.UK, for the 1 percent per nine weeks and 1 percent per five weeks increases, the £13.99 a week example and the lump sum rules.
- Winter Fuel Payment: if your income is over £35,000, GOV.UK, for how HMRC recovers the payment through a tax code or Self Assessment.
- Pension Tax Allowance Explainer, HM Treasury, published 28 October 2026, for the £13,036.40 figure for 2027/28, the £13,037 and £13,319 thresholds and the worked examples.
- Tax codes, GOV.UK, for K codes and the limit on deductions.