A UK pensioner can receive £12,570 of taxable income in 2026/27 before paying income tax. That is the same personal allowance as everyone else; there has been no extra age-related allowance since 2016/17. The catch is that the State Pension counts towards it. The full new State Pension is £241.30 a week for 2026/27, which on HMRC's method works out at roughly £12,537 of taxable pension this year. That leaves someone on the full new State Pension only about £33 of other income before tax starts. Beyond that, tax-free headroom comes from the savings and dividend allowances, Marriage Allowance and Blind Person's Allowance, and from no longer paying National Insurance on earnings.
The personal allowance and the State Pension
The State Pension is taxable income, but it is paid without tax deducted. HMRC adds it to your other income, such as a workplace or private pension, earnings, rent and investment income, and taxes the total above £12,570 at 20%, 40% and 45% in the usual bands (Scottish taxpayers pay Scottish rates on non-savings income such as pensions and earnings). The personal allowance is withdrawn by £1 for every £2 of income over £100,000.
HMRC works out a full year's taxable State Pension as one week at the rate before the April uprating plus 51 weeks at the new rate. Illustration, using the published weekly rates:
| Pension (full rate, 2026/27) | Weekly rate | Taxable amount for 2026/27 (HMRC method) | Room left in £12,570 allowance |
|---|---|---|---|
| New State Pension (reached State Pension age from 6 April 2016) | £241.30 | £230.25 + 51 × £241.30 = £12,536.55 | £33.45 |
| Basic State Pension (reached State Pension age before 6 April 2016) | £184.90 | £176.45 + 51 × £184.90 = £9,606.35 | £2,963.65 |
Your own figure depends on your actual entitlement. Many people receive more or less than the full rate because of contracting out before 2016, Additional State Pension, or the number of qualifying years on their National Insurance record. Your DWP letter gives the amounts HMRC uses. If you reached State Pension age part-way through the year, only the weeks from your entitlement date count.
What happens when other income takes you over
Illustration, using England, Wales and Northern Ireland rates: a pensioner on the full new State Pension with a £10,000 workplace pension has taxable income of about £22,537. That is £9,967 above the personal allowance, giving tax of about £1,993 at 20%. In practice HMRC collects this through the workplace pension's tax code. HMRC's guidance confirms that a private pension provider will usually deduct the tax due on your State Pension as well, which is why private pension tax codes are often much lower than people expect.
Where the State Pension is your only income and it exceeds your allowance, there is no payroll to collect the tax. HMRC instead sends a Simple Assessment bill after the tax year ends. The full new State Pension is now within about £33 of the allowance, so even a modest increase in April 2027 would take it over, because the personal allowance is frozen at £12,570 until 2030/31. The government announced at Budget 2025 that, from 2027/28, pensioners whose sole income is the basic or new State Pension without any increments will not have to pay small amounts of tax through Simple Assessment. It said it would set out more detail later, and the mechanism should be checked once it is published. The easement as announced does not cover anyone with any other taxable income, however small.
Extra tax-free room for pensioners
- Savings interest. If your non-savings income is below £17,570, part or all of the £5,000 starting rate for savings is available at 0%. The State Pension counts as non-savings income, so a pensioner whose only other income is the full new State Pension (£12,536.55) has all of it available. On top of that sits the personal savings allowance of £1,000 for basic rate taxpayers. See our guide to the personal savings allowance;
- Dividends. The first £500 of dividends is taxed at 0%, and dividends inside an ISA are tax-free;
- Marriage Allowance. A spouse or civil partner with income below the personal allowance can transfer £1,260 of it to a basic rate taxpayer partner. That saves up to £252 a year. Couples where one partner was born before 6 April 1935 can instead claim the more valuable Married Couple's Allowance;
- Blind Person's Allowance. This adds £3,250 to the personal allowance in 2026/27 for those who qualify;
- Pension lump sums. You can usually take 25% of a pension pot tax-free, up to an overall maximum of £268,275, and the tax-free lump sum does not use up your personal allowance.
Working after State Pension age
Earnings after State Pension age are taxed in the normal way and count towards the £12,570 like any other income. National Insurance is different. Employees stop paying Class 1 National Insurance once they reach State Pension age, although their employer continues to pay its share. Self-employed people stop paying Class 4 from the 6 April after they reach State Pension age. For a pensioner earning £20,000 from employment, that is a real saving even though income tax continues. Check our guide to UK pension age for when State Pension age applies to you.
Common problems and how to fix them
- Emergency tax on pension withdrawals. A flexible withdrawal from a pension pot can have too much tax taken. HMRC has specific forms (P55, P53Z and P50Z, depending on the circumstances) to reclaim it in-year, and it checks the position again after the tax year ends. Our guide to HMRC tax refunds explains the routes;
- Large lump sums. HMRC warns that taking a large amount from a pension can push you into a higher rate band for that year. Spreading withdrawals across tax years is often cheaper;
- Arrears paid in one go. If a pension provider pays several years' arrears as a single sum, you can ask HMRC to recalculate each year's tax using the provider's payment schedule;
- Wrong tax codes. A code that double-counts the State Pension, or misses Marriage Allowance, is common. Check the code against your DWP letter each April.
Pensioners with several income sources, such as State Pension, workplace pensions, rent and investments, often benefit from one review of their codes and allowances. Acumon prepares income tax returns and advises on drawdown timing and allowances through our private client tax service.