Is the state pension taxable?

The state pension is taxable income and doesn’t have tax deducted at source. The full rate of new state pension, from April 2024 is £221.20 a week, but the rate you receive is dependent on various things including: 

• Your National Insurance record; how many qualifying years you have 
• If you were contracted out before 2016 
• If you paid additional state pension before 2016 

If you are receiving the full state pension, your annual income for 2024/25 is £11,502. With the personal allowance at £12,570, there is a chance that pensioners could be pushed into having to complete a tax return, where they have additional taxable income. In particular, those who paid into the additional state pension could be affected. 

The state pension is paid every four weeks. The amount you receive may not neatly match up with the taxable amount for the year. 

The state pension increases year on year by whichever is the highest of: 

• earnings – the average percentage growth in wages (in Great Britain) 
• prices – the percentage growth in prices in the UK measured by the Consumer Prices Index (CPI) 
• 2.5% 

Therefore it is possible that your state pension will be close to or exceed the personal allowance in 2025/26. 

If you have given up part of your personal allowance by using the marriage allowance, your remaining personal allowance could be £11,310 and therefore you could be affected by the increase in state pension sooner. 

If individuals have other PAYE sources of income, the state pension is often taxed by being ‘coded out’. This means that you pay more tax on those other PAYE sources of income. It’s important to check your tax code to ensure you’re having enough tax deducted so you don’t have a shortfall. 

If individuals don’t have another PAYE source of income, HMRC is likely to issue a simple assessment. Some state pensioners may need to fill in a full self-assessment tax return. 

How we can help 

If you need help registering for self-assessment and require assistance completing a tax return or knowing where you stand with you taxes, for example with a tax code check get in touch today. Call 01535 322795 or use our online contact form. 

Date published 22 Apr 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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