From MoneyWeek · · 1m 20s
2026 Budget Pension Changes
Pensioners face tax hikes but new state pension rate boosts.
In brief
Pensioners face tax hikes but new state pension rate boosts. Pensioners in the UK will see tax increases on savings and rental income but a new pension tax allowance prevents income tax for those earning under £13,037 annually. Originally reported by MoneyWeek.
Budget's Pension Tax Allowance
A new pension tax allowance for low-earning pensioners equals the 2027/28 full state pension rate of £13,037 per year.
Pension Tax Allowance Reduction
The allowance reduces by £1 for every £3 of income above £13,037, disappearing at £13,319.
Savings Tax Increase
Savings tax rates rise by two percentage points from April 2027, taxing interest at 24% for basic rate taxpayers.
Savings Tax Impact
Higher rate taxpayers face 44% tax on savings interest, while additional rate taxpayers pay 49%.
Pension Death Benefits Change
The two-year rule for tax-free pension death benefits is removed for beneficiaries.
Terminal Illness Definition
New rules allow pension lump sums for those expected to die within 12 months.
State Pension Triple Lock
The triple lock will adjust from 2030 to ensure state pension keeps pace with inflation and earnings.
Rental Income Tax Increase
Tax on rental income rises by two percentage points from April 2027.
Pensioner Advice
Pensioners should review savings and rental income before April 2027 to avoid tax traps.
The main idea
Pensioners in the UK will see tax increases on savings and rental income but a new pension tax allowance prevents income tax for those earning under £13,037 annually.
