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Newsletter issue – October 2026
Earlier in the year, the then Chancellor, Rachel Reeves, promised that pensioners who rely solely on the state pension will not pay income tax, but this exemption will not apply to those who defer their state pension.
The state pension is expected to rise by over £500 next year, taking it above the £12,570 personal allowance for the first time. Experts believe it may reach over £13,000 if next year's uplift matches wages growth. Deferral increases the pension by 1% every nine weeks, or 5.8% per year. Under the government's rules, someone deferring for one year and claiming in April 2027 could face an extra tax bill of up to £560, while someone claiming immediately would pay nothing.
Analysis from consultants, LCP, shows the exemption pledge helps only 800k out of 13.2m pensioners. Those with Serps, living abroad, or receiving other taxable income will not qualify. Experts feel it is 'odd to penalise those who defer and not those who don't', especially when the government wants people to work longer.
