UK Treasury confirms state pensions stay tax‑free for retirees

The Treasury, now led by Chancellor John Healey, affirmed that anyone whose sole income is the full new or basic State Pension will not be liable for income tax. A Treasury spokesperson said, "Anyone whose only income is the full new or basic State Pension without any increments will not pay income tax and we are committed to that over this Parliament," continuing the pledge made by former Chancellor Rachel Reeves.

Separate analysis shows that hundreds of Britons who fully cashed in large pension pots after the government announced that unused pension savings will fall under inheritance tax from April 2027 have faced tax bills of roughly £100,000 each. Withdrawals exceeding the tax‑free quarterly allowance are taxed at the saver’s marginal rate, pushing the amount into higher tax bands and creating substantial immediate liabilities despite the inheritance tax change not taking effect until 2027.