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  "path": "/money/hmrc-explains-how-state-pension-tax-works",
  "publishedAt": "2026-06-01T08:38:21.000Z",
  "site": "https://www.gbnews.com",
  "tags": [
    "Driving law changes you missed in May - New HMRC rates, fuel duty cut, DVSA rules and more",
    "HMRC urges married couples to check eligibility for tax break worth up to £252",
    "HMRC warning as self-employed workers face £200 fines under new tax rules",
    "The GB News Editorial Charter"
  ],
  "textContent": "\n\n\nHM Revenue and Customs (HMRC) has clarified a widespread misunderstanding surrounding state pension tax after many retirees were left confused by changes to their tax codes.\n\nMany pensioners who rely solely on their state pension have historically paid no tax on their Department for Work and Pensions (DWP) income, leading some to mistakenly believe the payments are tax-free.\n\n###\n\n\n\n\nHowever, HMRC confirmed the state pension has always been taxable.\n\nThe confusion stems from the way tax is collected on state pension payments compared with other forms of income.\n\n###\n\n\n\n\nTRENDING\n\nStories\n\nVideos\n\nYour Say\n\n###\n\n\n\n\nUnlike private pensions or salaries, the DWP does not deduct tax directly from state pension payments before they are paid.\n\nInstead, HMRC adjusts a person's tax code to recover any tax owed through other sources of income, such as a workplace or private pension.\n\nHMRC’s customer support account on X explained the process while responding to a pensioner querying a change to their tax code.\n\nThe tax authority said: \"The State Pension is taxable, but the DWP doesn't take tax at source, so we change your tax code to give enough of your tax free allowance to match the State Pension, leaving whatever's left for a private pension.\"\n\n###\n\n\n\n\n###\n\n\n\n\n###\n\n\n\n\nUnder the current system, part of the £12,570 personal allowance is allocated against state pension income.\n\nAny remaining allowance is then applied to other taxable income, including private pensions.\n\nThe issue has gained renewed attention following concerns about future increases to the state pension under the triple lock system.\n\nChancellor Rachel Reeves previously confirmed pensioners whose only income comes from the state pension would receive an exemption from paying income tax from April 2027.\n\n### LATEST DEVELOPMENTS\n\n\n\n\n  * Driving law changes you missed in May - New HMRC rates, fuel duty cut, DVSA rules and more\n  * HMRC urges married couples to check eligibility for tax break worth up to £252\n  * HMRC warning as self-employed workers face £200 fines under new tax rules\n\n\n\n###\n\n\n\n\n###\n\n\n\n\nThe move is intended to prevent pensioners from facing tax bills solely because annual state pension increases exceed the frozen personal allowance threshold.\n\nUnder the triple lock, state pension payments rise each year by whichever is highest among earnings growth, inflation or 2.5 per cent.\n\nWith earnings growth recently recorded at 4.8 per cent, the full new state pension is expected to rise to around £12,548, close to the £12,570 personal allowance threshold.\n\nOlder pensioners receiving the basic state pension alongside additional pension payments are not expected to qualify for the exemption.\n\n###\n\n\n\n\n###\n\n\n\n\nRachel Vahey, head of public policy at AJ Bell, said: \"That measure is designed to avoid the unwelcome optics of Government giving pensioners a benefit on one day, only to then ask for some of it back the next.\"\n\nMs Vahey warned the long-term sustainability of the policy could become more difficult if state pension payments continue to rise faster than the frozen personal allowance through to 2031.\n\nShe also raised concerns about differences in treatment between pensioners whose only income is the state pension and those with additional private retirement savings.\n\nMs Vahey said: \"It means two pensioners on identical incomes could find only the one with private savings has to pay any tax.\"\n\n###\n\n\n\n\n\n\n\n\n\n\n**Our Standards: The GB News Editorial Charter**",
  "title": "HMRC explains how state pension tax works as retirees face confusion"
}