Is the State Pension taxable

Short answer, yes it is…

The State Pension is worth between £6,359.60 (the old version), and £8,296.60 (the new version), and many pensioners may receive additional payments based on additional contributions made in prior years. In both cases, this pension income is treated the same as earned income for income tax purposes.

For 2017-18, every person resident in the UK for tax is allowed to earn £11,500 tax free. Accordingly, if your only source of income is the State Pension you will have no tax to pay. A potential problem can arise if you have other income, say taxable investment income or other earnings, that when combined with your State Pension, add to more than your personal allowance.

Your State Pension is paid to you without a deduction of tax. Many pensioners rely on these payments to fund their day to day expenditures so there is a temptation to spend what you get. Unfortunately, if your total income (State Pension plus other earnings and investment income) exceeds your personal allowance, you may end up with a tax bill at the end of the tax year and the first you may hear about this is when the bill from HMRC drops through your letter box.

Our advice, is do the sums. If your estimated income from all sources is likely to exceed £11,500 for 2017-18, you may need to save for any year-end tax due. The sums can be complicated as there are reliefs other than your personal tax allowance that you may need to consider.

Latest Blog
13
Jan

How rising income can cost you valuable tax allowances and benefits

For many taxpayers, an increase in income feels like a straightforward positive. High...

Read More
08
Jan

HMRC names finalists in drive to close the tax gap

In December 2025, HM Revenue and Customs announced the finalists in a competition aim...

Read More
06
Jan

Government changes course on inheritance tax reliefs

In late 2025 the government confirmed a significant change of direction on inheritanc...

Read More
04
Jan

Construction Industry Scheme changes

As part of the Budget measures, the government confirmed plans to make some changes...

Read More