Do I Pay Tax on My State Pension? 2026/27 Rules Explained

Yes — the State Pension is taxable income. It counts towards your Personal Allowance and your tax bands in exactly the same way as a wage or a private pension. The difference is that it is always paid gross, with no tax deducted, so any tax due has to be collected somewhere else: usually through the tax code on another pension or job, or by a Simple Assessment letter from HMRC.

For 2026/27 the full new State Pension is £241.30 a week, or roughly £12,547.60 over a 52-week year. The Personal Allowance is frozen at £12,570. So someone with the full new State Pension and nothing else has about £22 of allowance left and pays no income tax at all.

Key points

• The State Pension is taxable, but it is never taxed at source — there is no PAYE on it.
• Full new State Pension for 2026/27: £241.30 a week, about £12,547.60 a year, against a £12,570 Personal Allowance.
• If you have any other income — a workplace pension, wages, self-employment, rent — the State Pension eats your allowance first, so almost all of that other income is taxable.
• National Insurance is never due on pension income, and employees stop paying Class 1 NI once they reach State Pension age.
• If the State Pension is your only income but it exceeds your allowance, HMRC collects the tax by Simple Assessment rather than a tax code.

Is the State Pension taxable?

It is. HMRC treats it as "non-savings, non-dividend" income, the same category as employment income and private pensions. That matters for two reasons: it is the first slice of income to use up your Personal Allowance, and in Scotland it is charged at Scottish income tax rates.

One quirk: you are taxed on the State Pension you were entitled to during the tax year, not on the cash that happened to land in your bank account. Because the State Pension is paid four-weekly in arrears, the amount paid in a tax year rarely matches the amount accrued. HMRC works from the weekly rate multiplied by the number of weeks in the year, which is why its figure can differ slightly from your bank statements.

If you reached State Pension age before 6 April 2016 you are on the old system: basic State Pension plus any additional (SERPS/State Second) pension, graduated retirement benefit and, in many cases, a protected payment. Those elements are all taxable too, and together they can easily push a pre-2016 pensioner past £12,570 even with no private pension at all.

What is not taxable

Some retirement income is outside the tax net entirely and should never appear in a tax calculation:

• Pension Credit
• Attendance Allowance and Personal Independence Payment
• Winter Fuel Payment
• The tax-free 25% lump sum from a private pension
• ISA interest and dividends

Why no tax is deducted from your State Pension

The Department for Work and Pensions pays the State Pension without operating PAYE. There is no mechanism to take tax off it, and no plan to build one. So HMRC's approach is the reverse: it works out how much of your Personal Allowance the State Pension uses up, and taxes everything else more heavily to compensate.

That is why a pensioner's tax code often looks alarmingly small. If your State Pension is £12,547 and your allowance is £12,570, only about £22 of allowance is left to set against your private pension — so your private pension code will be something like 2L, and virtually every pound of it is taxed at 20%.

National Insurance is a separate story: you pay no NI on any pension income, at any age, and Class 1 NI stops on earnings once you reach State Pension age (your employer keeps paying their 15% secondary contributions above the £5,000 threshold).

Nearing — or passing — the Personal Allowance

Because the Personal Allowance is frozen at £12,570 while the State Pension rises each April under the triple lock, the gap between the two is narrowing every year. For 2026/27 the full new State Pension sits about £22 below the allowance. On current policy the crossover point arrives shortly afterwards, which is why so many pensioners who have never dealt with HMRC are about to. We cover the mechanics of that in what happens when the State Pension overtakes the Personal Allowance.

Worked example: State Pension plus a small private pension

Margaret gets the full new State Pension of £12,547.60 and a workplace pension of £6,000 a year.

1. Total income: £12,547.60 + £6,000 = £18,547.60
2. Less Personal Allowance: £18,547.60 − £12,570 = £5,977.60 taxable
3. All within the basic rate band (first £37,700 above the allowance): £5,977.60 × 20% = £1,195.52

That £1,195.52 is collected entirely from the £6,000 workplace pension through PAYE, leaving Margaret with about £4,804 from it. Nothing is taken from the State Pension itself.

The same example in Scotland

Scottish rates apply to non-savings income, so a Scottish taxpayer's pension income is taxed using the Scottish bands. On the same £5,977.60 of taxable income:

• Starter rate: £3,967 × 19% = £753.73
• Basic rate: £2,010.60 × 20% = £402.12
• Total: £1,155.85 — about £40 less than in England, Wales or Northern Ireland

Scottish pensioners on larger incomes fare differently: the higher rate there is 42% and it starts once taxable income passes £62,430 of band, so mid-to-high pension incomes can pay more than they would elsewhere in the UK.

When the State Pension alone exceeds your allowance

Pre-2016 pensioners with a large additional pension, and anyone who deferred their State Pension and is now receiving an uplift, can find the State Pension on its own is above £12,570. If you also have a private pension, HMRC handles this with a K code — a negative allowance.

Example: State Pension of £14,000 plus a private pension of £5,000.

1. State Pension exceeds the allowance by £14,000 − £12,570 = £1,430, giving a code of roughly K143
2. The private pension is taxed as though it were £5,000 + £1,430 = £6,430
3. £6,430 × 20% = £1,286 deducted from the £5,000 private pension across the year

There is a regulatory cap so that PAYE cannot take more than half of any single payment, so if the K code would swallow too much, the balance rolls into a later year or a separate bill.

How HMRC collects the tax

There are three routes, and which one applies depends on what other income you have.

• Through a tax code. If you have a private or workplace pension, or a job, HMRC reduces the code on that source by the amount of your State Pension. This is by far the most common method and it happens automatically — you will see it itemised on your coding notice as "State Pension".
• Through Self Assessment. If you already file a return — for rental income, self-employment, large dividends or because you are a higher earner — the State Pension goes on the return and the tax is settled with everything else by 31 January.
• Through Simple Assessment. If you have no PAYE source to code against, HMRC calculates the bill itself and writes to you.

The weak link is the coding notice. HMRC codes your State Pension using an estimate of the annual figure, and if the estimate is stale — an April uprating not yet fed through, a deferral uplift, or a private pension that has changed — the code will be wrong. Underpayments then surface a year later as an unexpected bill; overpayments sit unclaimed. If your numbers have moved, it is worth running our underpaid tax check to see whether your code matches your actual income.

For more on the wave of coding notices and bills reaching pensioners this year, see why more pensioners are getting HMRC tax bills in 2026.

Simple Assessment: the letter that replaces a tax return

Simple Assessment is HMRC's way of taxing people whose affairs are straightforward but who have no PAYE source to lean on. It is used heavily for pensioners whose State Pension exceeds the Personal Allowance and who have no private pension to code against.

You do not apply for it and you do not fill anything in. HMRC sends a calculation — often on form PA302 — showing the income it holds for you, the allowance deducted, and the tax to pay. You do not need to register for Self Assessment.

What to do when one arrives:

• Check the figures line by line. Compare the State Pension figure with your DWP uprating letter, and any private pension or interest figures with your own records. HMRC sometimes uses estimates.
• Query it quickly if it is wrong. There is a short window to contact HMRC and dispute the calculation before it becomes final.
• Pay by the deadline. Payment is generally due by 31 January after the end of the tax year, or within three months of the date on the letter if it was issued late in the year. You can pay online through the GOV.UK Simple Assessment service.

A Simple Assessment bill on a State-Pension-only income is usually small — tens of pounds rather than hundreds — because only the slice above £12,570 is taxed at 20%. If the letter shows a large figure, something in the underlying income data is probably wrong.

Common reasons pensioners pay the wrong amount

• Two pensions, one allowance. If you draw from more than one private pension, HMRC has to split the allowance. Get the split wrong and one pension is over-taxed while the other is under-taxed.
• A BR code on a second pension. Flat 20% on the whole payment, with no allowance — correct in many cases, wrong if you have allowance to spare.
• Savings interest. With the Personal Savings Allowance at £1,000 for basic-rate taxpayers (£500 for higher rate) and the starting rate band of £5,000 for savings income, many pensioners with modest incomes pay nothing on interest — but HMRC may still code an estimate into your tax code.
• Marriage Allowance. If one of you has income below £12,570 and the other is a basic-rate taxpayer, £1,260 of allowance can be transferred, worth £252 a year.
• Deferral. An extra amount from deferring becomes taxable when you start drawing it, and HMRC's estimate may lag behind.

What to do next

Start with the two numbers that drive everything: your annual State Pension entitlement and your total other income. If you have not yet claimed, or want to confirm what you are due, use our State Pension forecast tool. If you are already drawing it and suspect your code is wrong or a bill looks too high, run the underpaid tax check — and use the income tax calculator to see what your total bill should actually be for 2026/27.