New data from the Office for Budget Responsibility (OBR) predicts a significant rise in the number of pensioners set to pay income tax as a direct result of frozen tax thresholds. If you are retirement planning in Oswestry or Cheshire, the figures show that 600,000 more pensioners than estimated are due to pay income tax in 2026-27, rising to 1 million by 2030-31.
The full UK state pension, which is worth £230.25 per week, is below the annual £12,570 personal tax allowance. In the November 2025 budget, the Chancellor, Rachel Reeves, extended the personal tax allowance freeze until 2031. In 2027-28, the state pension is forecast to exceed the personal allowance for the first time since its introduction. The ‘triple-lock’, introduced by the previous government and retained by the current one, ensures that pensions increase by whichever is higher out of inflation or earnings, or 2.5%.
HM Revenue and Customs (HMRC) has calculated its data based on a revised modelling of the UK population exposed to personal tax threshold freezes since 2021. Those pensioners with extra income streams are predicted to pay tax ahead of 2027-28. The good news for all those concerned, is that the projected tax revenue is likely to be small, with the yield to HMRC expected to be no more than £0.1 billion.
In a statement, the OBR said the government would be setting out which pensioners will be exempt from income tax, ahead of the changes which are due to take effect from April 2027.
