State pensioners warned to look out for HMRC letter over 'unpaid tax'

State pensioners have been warned they could get an unexpected tax bill from HMRC. As state pension payments increase, more people are being dragged into paying income tax. The full new state pension is already £230.25 a week, or £11,973 a year. This is just £600 away from using up the personal allowance, which allows a person to earn up to £12,570 without paying income tax.

Mark Pemberthy, benefits consulting leader at Gallagher, said many state pensioners already pay the tax but there could be issues with people starting to pay the tax as their income increases. He explained: "The freezing of the personal allowance until at least April 2028 means that this will be a mainstream issue for the growing proportion of pensioners receiving the new state pension - particularly for those where the state pension is their only source of income in retirement.

"HMRC has a simple assessment process for collecting income tax, but this results in people getting a request for payment of unpaid tax at the end of the tax year. There is a big risk that this will lead to a lot confused and unhappy people in April/May 2027 unless there has been a very effective communication campaign in the meantime or a significant change in policy."

The triple lock is expected to increase state pension payments by 4.7 percent next year, lifting the full new state pension to £241.05 a week, or £12,534.60 a year. The triple lock pledge means the state pension goes up each April in line with the highest of 2.5 percent, the rise in average earnings or inflation.

As the costs of funding the policy continue to ramp up, some experts are dubious if the Government can keep the triple lock for much longer. Mr Pemberthy said: "With public finances already under strain, reform is needed soon to avoid placing an unfair burden on future generations.

"The imminent Pension Commission will look at what is required to build a future-proof pensions system that is strong, fair and sustainable, and we anticipate that this will recommend an alternative to the triple lock when it publishes its findings in 2027.

"We hope that this will have broad political consensus and be the foundation for a long term sustainable future pension strategy." Another change the Government can make to curb the costs of the state pension is to increase the access age.

The state pension age is currently 66 and is rising to 67 between April 2026 and April 2028. This is timetabled to increase again from 67 to 68 between 2044 and 2046.

A previous review of the state pension age suggested bringing forward the move to 68, but this was not taken up by the previous Conservative Government. The Government has announced another review of the state pension age will take place. Labour has yet to make clear if it will make any changes to the state pension as more people face being pulled into the income tax bracket.