Aegon’s pensions director Steven Cameron estimates that by the 2027/28 tax year, the state pension will increase to £12,579.13
A 4.1 per cent increase to the state pension in April has seen it rise to £12,014, bringing it “perilously close” to exceeding the Personal Tax-Free Allowance as outlined by HMRC. With inflation expected to be 3.2% over the next year, according to predictions by the OBR, the state pension could rise to £12,398.57 in 2026/27.
And Aegon’s pensions director Steven Cameron estimates that by the 2027/28 tax year, the state pension will increase to £12,579.13, or £9.13 above the threshold. As it stands, state pensioners are £597 away from exceeding the threshold.
The standard Personal Allowance is £12,570, which is the amount of income you do not have to pay tax on. But, for every £2 you earn over £100,000, you lose £1 of your tax-free Personal Allowance.
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The standard Personal Allowance is £12,570, which is the amount of income you do not have to pay tax on.
There is currently a petition to raise the HMRC income tax personal allowance threshold from £12,570 to £20,000, which has received more than 230,000 signatures and a response from the treasury, although there were no changes in the Spring statement 2025.
The petition to Parliament was started by Alan David Frost, saying: “Raise the income tax personal allowance from £12570 to £20000. We think this would help low earners to get off benefits and allow pensioners a decent income.”
“The typical number is £12,570,” Martin Lewis previously said. “So if you earn less than that, and that’s total earnings from work and from a pension or interest on your savings, if you earn less than that, it isn’t taxed.
“If you earn more than that, some of it is taxed, and the ‘some of it’ part is crucial. If your allowance is £12,570 pounds, and you earn more, it’s only the bit above that that you pay 20% tax on.”
He added: “All these tax thresholds are England, Wales and Northern Ireland is slightly different in Scotland, but the principle is the same.” He continued, saying: “So let’s imagine you earn £13,570 , that’s £1000 above the threshold, you pay 20% tax on £1000 – you pay £200 pounds tax.
“You don’t pay 20% tax on the entire amount you earned. And that happens every time you go above a threshold. You only pay the increased rate on the amount above the threshold.
“I’ve actually had some people who say to me that just offered me money. I’m going to get a pay rise. It’s going to put me under tax threshold. I should say no, shouldn’t I, because it means I’ll take home less. Incorrect, earn more, you will take home more.”
