Do I pay tax on my State Pension?
Almost certainly yes, in 2026/27, if you have any income at all beyond the State Pension — and almost certainly yes from April 2027 even if you don't. The four branches below cover the situations we see most often. The State Pension itself is always taxable; the question is how (and where) the tax actually gets taken.
- 1 Only the State Pension, no other income→ Almost no tax in 2026/27 because the full new State Pension (£12,547.60) is still £22.40 below the Personal Allowance. From April 2027 the SP is forecast to exceed the PA — HMRC will then bill the small shortfall via Simple Assessment.
- 2 State Pension + workplace or private pension + savings→ PAYE on the workplace pension covers the SP tax. HMRC reduces the workplace tax code by your State Pension amount. Watch out for a K code if SP > PA.
- 3 State Pension + part-time job→ PAYE on the job is adjusted for the State Pension via your tax code. You stop paying Class 1 NI on earnings once past State Pension age — but income tax still applies.
- 4 State Pension > Personal Allowance (rare today, normal from 2027)→ HMRC issues a K code on your other income, or — if you have no PAYE income — a Simple Assessment bill (PA302) to settle once a year.
How HMRC actually collects the tax — a line-by-line worked example
This is the part that surprises most pensioners. There is no payslip, no tax line on the State Pension statement, no monthly deduction. The tax is real and gets paid — it just gets paid through a different income stream. Here is the standard case: full new State Pension plus a small defined-benefit (DB) workplace pension.
HMRC cannot deduct that £1,595.52 from the State Pension — DWP pays it gross. So HMRC reduces the tax code on the £8,000 DB pension instead. The mechanics:
- Personal Allowance £12,570 minus State Pension £12,548 (HMRC rounds) = £22 of allowance left over for the DB pension.
- £22 becomes tax code 2L on the DB pension (the L means standard allowance; the digits are the allowance divided by 10).
- The DB pension provider applies code 2L to £8,000 a year. That means £7,978 is taxed at 20% — roughly £1,596, or £133 a month withheld at source on the workplace pension.
- The DB pension net of tax: £8,000 − £1,596 = £6,404 per year, or about £534 a month in the bank.
From your perspective the State Pension arrives untouched and the workplace pension lands lighter than expected. That is the tax being collected. There is no separate HMRC bill — everything settles inside PAYE.
The K code — what happens when the State Pension is bigger than the Personal Allowance
For 2026/27 a K code on the State Pension itself is unusual: the full new State Pension is £12,547.60, fractionally below the £12,570 Personal Allowance. But people on older basic State Pension plus large amounts of additional pension (SERPS / S2P), and pensioners who deferred for several years, can already trigger a K code today. From April 2027 it becomes the normal case for full-rate new State Pension recipients.
The mechanics are the same as a normal tax code, just running in the opposite direction. Instead of a "free" tax-free slice, a K code adds extra taxable income onto your PAYE source. Two examples:
- State Pension exceeds PA by £1,430.
- No PAYE source for HMRC to attach a code to.
- HMRC issues a Simple Assessment (PA302) after the tax year ends, or puts you into Self Assessment if you have other untaxed income.
- Tax due: £1,430 × 20% = £286. Payable by 31 January after the tax year ends.
- State Pension exceeds PA by £1,430 — the "overhang".
- HMRC issues a K code: K143 on the DB pension (1,430 ÷ 10 = 143).
- DB pension is taxed as if it were £6,000 + £1,430 = £7,430.
- Tax taken: £7,430 × 20% = £1,486, withheld monthly via PAYE on the £6,000 DB pension stream.
- A 50% cap stops more than half of any payment being taken in tax; if your DB pension is small enough that the K code can't take all the tax, HMRC bills the remainder by Simple Assessment.
Inline calculator — your annual tax bill
Default £241.30 (full new SP 2026/27).
Workplace pension, drawdown, salary.
First £1,000 is covered by the PSA.
Approximate. Uses 2026/27 rUK bands (PA £12,570, basic 20% to £50,270, higher 40% to £125,140, additional 45%). Scottish rates differ. Assumes you have no other allowances such as the Marriage Allowance and no untaxed dividends. Does not apply the savings starting rate (£5,000) which can apply where non-savings income is low. Always check the final figure with HMRC or a qualified adviser.
Three worked examples — same SP, different other incomes
The taxable line is always the same: total income minus the £12,570 Personal Allowance. The bill changes purely because of what else is coming in alongside the State Pension.
| Pensioner | State Pension | Other income | Total | Tax | How collected |
|---|---|---|---|---|---|
| SP only | £12,547.60 | £0 | £12,547.60 | £0 | Under PA — nothing to pay |
| SP + £6k DB | £12,547.60 | £6,000 | £18,547.60 | £1,195.52 | PAYE on the DB pension |
| SP + £20k drawdown | £12,547.60 | £20,000 | £32,547.60 | £3,995.52 | PAYE on the drawdown stream |
All figures are 2026/27, rest-of-UK tax bands (Scottish rates differ slightly). Drawdown figure assumes withdrawals from the 75% taxable portion only. See how drawdown is taxed for the full mechanics.
Three pensioner scenarios
Situation: Has been on the full basic + SERPS State Pension since 2010. Total weekly £240. No workplace pension, no savings beyond a £3,000 emergency fund.
Doris's State Pension is £240 × 52 = £12,480 a year — £90 under the £12,570 Personal Allowance. She owes no income tax. Her £3,000 in a bank account earns about £105 a year of interest, all of it covered by the Personal Savings Allowance (£1,000 for basic-rate taxpayers, and Doris is technically a non-taxpayer so the savings starting rate also applies).
In 2027/28, the picture changes. The April 2027 uprating is widely forecast (LCP, Canada Life, OBR) to push the full new State Pension above £12,570 for the first time. Doris's older basic + SERPS combination will likely be uprated similarly, and HMRC has signalled that pensioners in her position will be brought in via Simple Assessment — a one-page bill from HMRC, payable by 31 January, rather than a full Self Assessment return. The amount will be tiny — perhaps £20–£50 in the first year — but it will be the first time in her life Doris has received a tax bill.
Situation: Retired five years ago. Standard tax code on his workplace pension was 1257L before SP started; HMRC re-coded after his 66th birthday.
Frank's combined income is £12,547.60 + £8,000 = £20,547.60. Tax on the top slice of £7,977.60 at 20% = £1,595.52. HMRC reduces the workplace pension tax code from 1257L to roughly 2L (only £22 of Personal Allowance left after the State Pension takes the rest). The workplace pension provider deducts £133/month at source.
Frank's net income is £12,547.60 (gross SP, untaxed) + £6,404 (DB pension after PAYE) = about £18,952 a year, or £1,579 a month. The £8,000 DB pension that looked worth £667/month before tax is really worth £534/month after HMRC has used it to collect the State Pension tax. This is the standard UK pensioner pattern.
Situation: Widowed, owns her home, drawing from a £450,000 SIPP at 9% a year for the next decade then planning to taper. No workplace DB pension.
Helena's gross income is £12,547.60 + £40,000 = £52,547.60. That puts a small slice into the 40% higher-rate band:
- £12,570 covered by Personal Allowance
- £37,700 taxed at 20% (£12,571–£50,270) = £7,540
- £2,278 taxed at 40% (£50,271–£52,548) = £911
- Total tax: £8,451, collected through PAYE on the SIPP drawdown stream
Helena is on the cusp of higher rate. A small change — taking another £1,000 of drawdown, or savings interest pushing her over — costs 40p in the pound. She likely files Self Assessment rather than relying on PAYE alone, because savings interest, dividends and any one-off taxable withdrawals all need to be reconciled. Her SIPP provider applies a K-style code if HMRC re-codes mid-year; otherwise it operates a standard reduced tax code that nets out close to the right number.
One commonly missed trick for Helena: spreading drawdown withdrawals across two tax years can keep all of it in the basic-rate band, saving up to £900+ a year. Pairing drawdown with ISA withdrawals — which are tax-free and don't touch the personal allowance — is the other lever.
Why more pensioners pay tax every year — the frozen Personal Allowance
The Personal Allowance has been £12,570 since April 2021. The 2021 Spring Budget froze it until April 2026. The 2022 Autumn Statement extended the freeze to April 2028. The 2025 Autumn Budget extended it again, this time to April 2031. Meanwhile, the State Pension keeps rising every April under the triple lock — the higher of CPI inflation, average earnings growth, or 2.5%.
The result is the classic "fiscal drag": the State Pension catches the Personal Allowance and then overtakes it. Even the most cautious modelling has the full new State Pension exceeding the Personal Allowance from April 2027.
Age UK calculated in October 2024 that 8.5 million pensioners were already paying income tax — up by 2 million since the freeze began. The Lane Clark & Peacock (LCP) analysis following the Autumn 2025 Budget concluded that the new State Pension is "guaranteed" to exceed the Personal Allowance from April 2027 even on the most conservative triple-lock assumption. By the end of 2027/28, every full-rate new State Pension recipient is set to be liable for at least a small amount of income tax for the first time in the system's history. The Office for Budget Responsibility forecast the triple lock will cost the Treasury around £15.5 billion a year by 2030, even before the related tax-drag costs from a frozen allowance.
In practical terms: the small £22.40 gap between the £12,570 Personal Allowance and the £12,547.60 full new State Pension in 2026/27 is the smallest it has ever been. April 2027 closes it.
The biggest pensioner tax-saver: Marriage Allowance
If one of you has income below £12,570 and the other is a basic-rate taxpayer (income £12,571–£50,270), the lower earner can transfer £1,260 of their Personal Allowance to the higher earner. The higher earner saves £1,260 × 20% = £252 a year in tax. Pensioner couples often qualify because one partner has only the State Pension (below £12,570) and the other has SP plus a workplace pension. The lower-earning partner does not lose any tax-free pay — they were not using all of it anyway.
You can backdate a Marriage Allowance claim by up to four tax years. A first-time claimant in 2026/27 can recover £252 × 4 + the current year = up to £1,260. Apply free on GOV.UK — never pay a third-party agency, which can take 30%+ of any refund.
Full guide: Marriage Allowance for pensioners.
Working past State Pension age — you stop paying NI but not income tax
From the day you reach State Pension age (currently 66, rising to 67 from April 2028, 68 from 2046) you no longer pay Class 1 National Insurance on employed earnings or Class 4 NI on self-employed profits. Your employer keeps paying their employer's NI on your wages — that doesn't change — but your payslip stops showing employee NI deducted.
What does not change: you still pay income tax on the State Pension, on any wages or self-employed profits, on workplace pension income, and on savings/dividends above the relevant allowances. The "NI stops at SPA" rule sometimes makes people think the State Pension itself escapes tax — it does not.
Tell your employer or contracting client that you are over SPA and show them your birth certificate or HMRC Certificate of Age Exception (form CA4140). Otherwise NI may be deducted in error and you'll need to claim it back.
Understanding your tax code — the letter matters
- L — Standard Personal Allowance. The most common code, e.g. 1257L for the full £12,570 allowance. The digits are the allowance ÷ 10.
- K — Untaxed income (State Pension, company benefits) is bigger than your Personal Allowance. The digits show how much is being added to your taxable pay, e.g. K143 adds £1,430 of income.
- M — You have received £1,260 of your spouse's Personal Allowance through Marriage Allowance (so your allowance is £13,830).
- N — You have given away £1,260 of your Personal Allowance to your spouse (so your allowance is £11,310).
- T — HMRC needs to review your code. Often used when income near £100,000 means the Personal Allowance is being tapered (you lose £1 of PA for every £2 of income above £100k).
- BR — All this income is taxed at the basic rate (20%) with no Personal Allowance applied. Usually means the allowance is already used elsewhere — common for a second pension or part-time job.
- 0T — No Personal Allowance applied. Often seen as an emergency code on a first pension withdrawal — see our emergency tax guide.
- S (prefix) — Scottish taxpayer; C — Welsh taxpayer. The bands differ in Scotland; Wales currently uses the same rates as rUK but the prefix flags the residency.
"New analysis by pension consultants LCP has shown that the freezing of income tax thresholds for two further years to April 2030 in last week's Budget, coupled with the operation of the triple lock policy on state pensions, means that the new state pension is now guaranteed to exceed the income tax personal allowance in April 2027. This is the first time it will have done so since the system was introduced."
Source: Lane Clark & Peacock — press release, following the November 2025 Autumn Budget. (Note: the Budget extended the income-tax threshold freeze to April 2031; LCP's "April 2030" reference was based on the original two-year extension. The April 2027 crossover conclusion is unchanged.)
Frequently asked questions
- Is the UK State Pension taxable?
- Yes. The State Pension counts as taxable income in full — both the new State Pension and the older basic State Pension, including any additional or graduated retirement benefit. It is taxed at your marginal rate of income tax along with the rest of your income for the year. It is, however, not subject to National Insurance, and it does not in itself use up your Personal Savings Allowance or Dividend Allowance.
- How is tax paid on the State Pension?
- The Department for Work and Pensions (DWP) pays the State Pension gross — without any tax deducted. HMRC then collects the tax you owe on it in one of three ways. Most commonly, HMRC reduces the tax code on your other PAYE income (a workplace pension or job) so that more tax is taken from that source to cover the State Pension. If you only have the State Pension and it is bigger than your Personal Allowance, HMRC bills you through Simple Assessment or Self Assessment. If your State Pension is bigger than your Personal Allowance and you also have other income, HMRC issues a K code on the other income.
- Do pensioners get a higher Personal Allowance?
- No — not since 2016. The age-related Personal Allowance for people born before 6 April 1948 was phased out and the same £12,570 Personal Allowance now applies to everyone, regardless of age. The Personal Allowance has been frozen at £12,570 since April 2021 and is currently set to stay frozen until at least April 2028, with the 2025 Autumn Budget extending the freeze to April 2031.
- Why does DWP not deduct tax from the State Pension?
- The DWP pays the State Pension under a different administrative system from PAYE. Historically — and still today — the State Pension has been paid gross because HMRC already has visibility of most pensioners' other PAYE income and can collect tax there. Building a separate PAYE deduction system into DWP would duplicate work for the millions of pensioners whose State Pension is below the Personal Allowance and need no tax taking off it. The downside is the surprise for pensioners who discover, late, that they owe tax on a payment they assumed was tax-free.
- Can I avoid tax on my State Pension?
- Not really, beyond the standard income-tax tools. The State Pension is taxable income and cannot be paid into an ISA or pension wrapper. Three legitimate ways to reduce the bill: claim Marriage Allowance if your partner has lower income, defer the State Pension to a year when your other income is lower (this earns a roughly 5.8%-a-year uplift on the new State Pension), and time other taxable withdrawals — such as flexi-access drawdown — into tax years where they keep you below the next tax band. None of this makes the State Pension itself tax-free.
- What is a K tax code?
- A K code is HMRC's way of taxing untaxed income — most often the State Pension when it is larger than your Personal Allowance, or company benefits like a company car. A normal tax code (e.g. 1257L) tells your pension provider or employer to give you a slice of tax-free pay each month. A K code does the opposite: it adds untaxed income onto your PAYE earnings so that the tax can be collected there. Example: SP £14,000, workplace pension £6,000. Your "negative" allowance is £14,000 − £12,570 = £1,430. HMRC turns that into a K143 code on the workplace pension, so the £6,000 is taxed as if it were £7,430. There is a 50% rule that caps how much tax can be taken from any one payment, which means a K code can leave a remaining bill at year-end.
- Do I need to do Self Assessment for the State Pension?
- Only in narrow circumstances. If the State Pension is your only income and it is below your Personal Allowance, you owe no tax and need not file. If you have other PAYE income, HMRC normally collects through the tax code and you do not need to file. You do need Self Assessment, or HMRC may issue a Simple Assessment (PA302) calculation, if (a) your State Pension on its own is bigger than your Personal Allowance, or (b) you have untaxed income such as savings interest above the Personal Savings Allowance, rental income, or dividends above £500. The Simple Assessment route is HMRC's lighter-touch alternative to full Self Assessment for straightforward pensioner cases.
- Can I use Marriage Allowance with the State Pension?
- Yes — and pensioners are the group most likely to qualify. If one of you is a non-taxpayer (income under £12,570) and the other is a basic-rate taxpayer (£12,571–£50,270), the lower earner can transfer £1,260 of unused Personal Allowance to the higher earner. The receiving partner saves £252 a year in tax. You can backdate the claim four tax years, so a first-time claim today can be worth £1,000+. Apply free on GOV.UK — never pay a third party to do it. See our Marriage Allowance guide for the application steps.
- Will I always pay tax on the State Pension from 2027?
- Almost certainly, if you receive the full new State Pension and have any other income at all. The frozen £12,570 Personal Allowance is set to stay until at least April 2028, while the State Pension rises every April under the triple lock. The Lane Clark & Peacock analysis after the 2025 Autumn Budget concluded that the new State Pension is "guaranteed" to exceed the Personal Allowance from April 2027 even on the most conservative triple-lock assumption. The OBR has flagged this as a structural pinch point: by 2027/28, every full-rate new State Pension recipient is set to be liable for at least a small amount of income tax. HMRC has signalled that pensioners with only the State Pension whose tax owed is small will be brought into the bill via Simple Assessment rather than full Self Assessment.
- How does the State Pension affect tax on my other pensions?
- It reduces the tax-free slice you can take from other PAYE pensions. HMRC subtracts your expected State Pension from your £12,570 Personal Allowance and gives the remainder to your private pension or job as a tax code. If your State Pension is £12,547.60, only £22 of Personal Allowance is left for everything else — effectively meaning all of your workplace pension and earnings are taxed from pound one. This is why people who suddenly start receiving the State Pension often see their workplace pension take-home dip in the months that follow: their tax code has been re-coded down to cover the new income.
Sources
Every figure on this page traces to a primary or near-primary UK source:
- GOV.UK — Benefit and pension rates 2026 to 2027 (DWP). Source of the full new State Pension figure: £241.30/week = £12,547.60/year for 2026/27.
- HMRC PAYE Manual — PAYE76040: Coding the State Pension. Confirms the State Pension is paid gross and explains how HMRC reduces the tax code on other PAYE income (or issues a K code) to collect the tax due.
- Low Incomes Tax Reform Group — How tax is collected on the State Pension. Independent technical reference, including detailed worked examples of K codes, Simple Assessment and the interaction with workplace pensions.
- GOV.UK — Tax on your pension. Plain-English government guidance covering Personal Allowance, the State Pension, and how PAYE works on private pensions.
- HMRC — Income tax rates and allowances. Source of the £12,570 Personal Allowance, £37,700 basic-rate band, £50,270 higher-rate threshold and £125,140 additional-rate threshold for 2026/27.
- Lane Clark & Peacock — new State Pension guaranteed to exceed tax threshold in 2027. Analysis after the November 2025 Autumn Budget concluding that the new State Pension will cross the £12,570 Personal Allowance from April 2027 even on the most conservative triple-lock outcome.
- Age UK — Consequences of the freeze in the income tax allowance on State Pension amounts (October 2024). Estimate of 8.5 million pensioners already paying income tax, up by 2 million since the 2021 freeze began.
- House of Commons Library — Taxation of state pension (briefing CBP-10250). Comprehensive cross-reference on PAYE, Simple Assessment, the K-code mechanism, and the forecast 2027 crossover.
- Office for Budget Responsibility — Economic and Fiscal Outlook (Autumn 2025). Source of the cost projections for the triple lock and the fiscal-drag effects of the frozen Personal Allowance.
- GOV.UK — Marriage Allowance. Source of the £1,260 transfer / £252 saving figures and the application route.
- HMRC NI Manual — NIM01302: Age exception from State Pension age. Confirms Class 1 NI ceases on earnings from State Pension age (CA4140 certificate procedure).
- GOV.UK — Tax codes. Reference for the L / K / M / N / T / BR / 0T / S / C tax-code letters and their meanings.