The state pension overtakes the personal allowance from April 2027

Money Marketing reported on 21 October 2026 that the full new State Pension is expected to rise above the frozen Personal Allowance for the first time next April. A client's state pension has not changed what it is. The arithmetic around it has.

10 min read · Altro Partners, by Equity & General

£466.40

by which the full new State Pension is expected to exceed the frozen £12,570 Personal Allowance from April 2027

Money Marketing, 21 October 2026

Reacting to

State pension to surpass personal tax allowance threshold as inflation rises to 3.5% (Money Marketing, 21 October 2026)

Money Marketing reported on 21 October 2026 that the Office for National Statistics confirmed September's CPI inflation figure at 3.5%, up from 3.1% in August. On the back of that figure, the article reports the full new State Pension is expected to rise from £241.30 to around £250.70 a week, £13,036.40 a year, from April 2027. The Personal Allowance stays frozen at £12,570. For the first time, a client with no income beyond the full new State Pension is expected to owe income tax on it alone, by £466.40.

How close the state pension already sits to the allowance

This has been close for a while. In 2026/27 the full new State Pension is £241.30 a week, £12,547.60 a year, against a Personal Allowance of £12,570. That leaves £22.40 unused, a figure set out in a million pensioners paying higher rate tax. The freeze on the allowance, confirmed in HMRC's policy paper of 26 November 2025, holds it at £12,570 until 5 April 2031. The state pension, by contrast, rises each April under the triple lock. One of those two numbers was always going to catch the other.

Money Marketing's reporting puts the April 2027 rise at around £250.70 a week, £13,036.40 a year. Against the same frozen £12,570, that is £466.40 of income with no allowance left to cover it.

£241.30

full new State Pension, a week, 2026/27

£250.70

expected full new State Pension, a week, from April 2027

£12,570

Personal Allowance, frozen to 5 April 2031

£466.40

expected excess over the allowance from April 2027

GOV.UK; HMRC policy paper, Maintaining Income Tax and equivalent National Insurance contributions thresholds until 5 April 2031, 26 November 2025; Money Marketing, 21 October 2026.

Who the rise affects

The figure only applies to the full new State Pension, paid to someone who reached state pension age on or after 6 April 2016 with 35 qualifying years. Fewer qualifying years means a reduced new State Pension, below £241.30 a week now and below £250.70 from April 2027. A client's state pension award letter from the Pension Service shows which applies.

Money Marketing's reporting also gives the old basic State Pension, paid to those who reached state pension age before April 2016, as expected to rise to £192.10 a week, £9,989.20 a year, from April 2027. That stays under the allowance. The clients this reaches are specifically those on the full new rate with no deduction for fewer years, and otherwise no other income.

What a return with the state pension alone would show

This example uses made-up figures. A client retired after April 2016 with the full 35 qualifying years, no private pension, no savings interest, no other income of any kind.

A client with no income beyond the full new State Pension

Made-up figures, from April 2027

Full new State Pension£13,036.40

Personal Allowance£12,570.00

Taxable amount£466.40

At the basic rate of 20%, the tax due on that £466.40 is £93.28.

In 2026/27 the same client owes nothing: £12,547.60 sits under £12,570. The client's circumstances have not changed between the two years. The allowance has stood still and the pension has moved past it.

An older client going through a tax letter with their accountant

Collecting the tax with nothing deducted at source

The state pension is paid gross. No PAYE is taken from the payment itself, so a small liability arising from the state pension alone cannot be collected the way it would be from a salary or a private pension in payment.

Where a client has another PAYE source, a private pension or part-time earnings, HMRC's usual route is to code out the state pension against that income, reducing the client's tax-free amount on the other source instead. Where a client has no other PAYE income at all, HMRC issues a Simple Assessment, a tax calculation sent directly to the client outside self assessment. What a Simple Assessment letter tells you about a client sets out the mechanics of that letter, and what around 1.8 million of them for 2025/26 show about a client's position.

The FCA's Financial Lives 2024 survey found that 8.6% of UK adults, and 13% of self-employed adults, had taken regulated financial advice in the previous twelve months. A state-pension-only client, by definition, has limited other income to review, but the accountant is often the only person who sees the full return each year, including any small amount of savings interest sitting alongside the pension.

Who does what

Accountancy work

Identifying which clients' total income, state pension plus anything else, sits at or over the Personal Allowance is accountancy work, as is explaining what the frozen threshold does to that total from one year to the next, and what HMRC's collection method will be for a given client. None of it requires FCA authorisation.

Regulated advice

Whether a client's savings interest or other income is arranged in the most efficient way for them is a question for the Equity & General financial planner, who gives the advice and works alongside the accountant. The figures on who currently takes that advice are on the advice gap.

What to check this week

List clients on the full new State Pension with little or no other income. Check their total against £12,570 now and against £13,036.40 from April 2027. A client sitting just under the current allowance is the one most affected by the rise.
Note any savings interest or small pension alongside the state pension. Where it sits is a question for the financial planner. The return is where it first appears together with the state pension figure.

What is not yet settled

Money Marketing reports that the government has indicated people whose only income is the basic or new State Pension will not have to pay the small amounts of tax arising from the increase, but the mechanism for doing that has not been set out. Details are expected at the Budget on 28 October 2026.

The exact April 2027 state pension figures reported by Money Marketing are themselves described as expected. They are not yet confirmed, and depend on final data the triple lock calculation needs.

Common questions

Why is the state pension about to exceed the personal allowance?

Money Marketing reported on 21 October 2026 that ONS confirmed September's CPI inflation figure at 3.5%, up from 3.1% in August. The full new State Pension is expected to rise from £241.30 to around £250.70 a week, £13,036.40 a year, from April 2027. The Personal Allowance stays at £12,570, frozen until 5 April 2031 under the policy HMRC published on 26 November 2025. In 2026/27 the full new State Pension already sits at £12,547.60 a year, £22.40 under the allowance. The expected April 2027 rise takes it £466.40 past it, the first time the state pension alone has exceeded the allowance.

Which pensioners does this affect?

Only those on the full new State Pension, paid to people who reached state pension age on or after 6 April 2016 with 35 qualifying years. Someone with fewer qualifying years gets a reduced new State Pension, below the figures here. Money Marketing's reporting also gives the old basic State Pension, paid to those who reached state pension age before April 2016, as expected to rise to £192.10 a week, £9,989.20 a year, from April 2027, which stays under the Personal Allowance. A client's state pension award letter from the Pension Service shows which rate applies and whether it is reduced for fewer qualifying years.

How would HMRC collect the tax, since nothing is deducted from the state pension itself?

The state pension is paid gross, with no PAYE withheld on the payment itself. Where a client has another source of PAYE income, a private pension or earnings, HMRC usually collects the amount due by adjusting that income's tax code to account for the state pension. Where a client has no other PAYE income, HMRC issues a Simple Assessment, a tax calculation sent directly to the client outside self assessment. Money Marketing reported in July 2026 that the Simple Assessment letter volume for 2025 to 2026 is around 1.8 million.

What has the government said it will do about this?

Money Marketing reported on 21 October 2026 that the government has indicated people whose only income is the basic or new State Pension will not have to pay the small amounts of tax arising from the increase, though the mechanism for doing so has not been set out. Details are expected at the Budget on 28 October 2026. Until then, the position for a state-pension-only client stays as described above: a liability on paper, with the method of either collecting or writing it off still open.

How do the accountant and the financial planner work together on this?

In sequence. While preparing or reviewing a retired client's return, the accountant sees the total of state pension, savings interest, any other pension and any other income against the Personal Allowance, and can explain what the frozen threshold does to that total year on year. Where a client holds savings interest or other income alongside the state pension, whether it sits in the most efficient place for that client is a question for the Equity & General financial planner, who works alongside the accountant and gives the advice.

Financial planning for your clients, alongside the accounts and tax work

Equity & General holds the FCA authorisation. There is no charge to your firm, and a named partnership director works with you from the first introduction.