Do I pay tax on the state pension?

Even though you receive the state pension from the government, it still is classified as taxable income. The full state pension is currently £230.25 a week, equivalent to £11,973 a year. This is based on 35 full qualifying years of National Insurance contributions. What you'll get will depend on your own record, and the number of qualifying years you have when you come to claim.

The full state pension takes up almost all of the £12,570 you’re able to earn without paying income tax, known as the ‘personal allowance’.

This means that if the state pension is your only source of income, you will likely not need to pay tax on it because it falls under the personal allowance (except in special cases we will explore below). But, if you are still working or if you are getting an income from a private pension as well, this could quickly tip you into the taxable zone.

Depending on what other income you are getting, any tax on your state pension could be paid in different ways.

Collection of tax through PAYE

You may still be working while getting payments from the state pension. In that case, the tax will be taken off through the Pay as You Earn system (PAYE). This just means that any tax you owe the HMRC will be taken off your payslips before you receive them, just like income tax was taken off earlier in your career.

If you’re making a larger salary and could be bumped into the next tax bracket by the state pension, it can be a good idea to weigh out the tax benefits of waiting to take your state pension payments.

Collection of tax through a private pension

If you are receiving income through both a state pension and a private pension, HMRC will work with your private pension provider to remove any income tax you owe before the money is paid out to you. If you have multiple pensions, such as a workplace pension as well as a Self-invested personal pension (SIPP), HMRC will choose one of the pension providers to collect income tax.

Deferring the state pension

Because you must actively claim the state pension, you don’t need to do anything to defer it. For every nine weeks that you defer, you will get an extra 1% on your state pension payments once you opt in to receiving them, which equates to about 5.8% for a whole year of deferral. However, that extra percentage will still count towards any income tax you owe once you start receiving it.

Collection of tax through self-assessment

If you are still working and self-employed, you will need to file a self-assessment form which factors in any income you are receiving, including your state pension. Self-assessment forms must be filed by 31 January of the year following the tax year (for example, January 2026 for the 2024/25 tax year), but you can file before that if the tax year has ended. If you prefer to file by paper, your return needs to be sent by 31 October. If you don’t comply with these deadlines, you can face a fine. If you are filing a self-assessment return for the first time, you need to register by 5 October.

Collection of tax through ‘simple assessment’

If you do not have streams of income through an additional pension or workplace, there’s still a chance you could face some income tax, for things like interest on savings. This mostly applies to those who reached state pension age before April 2016, when there was a two-tier system of state pension, with a basic level and then additional payments. If your state pension income from this system goes over the personal allowance, you will face income tax.

In this case HMRC will send you a ‘simple assessment’ tax bill after the end of the tax year which shows how much you owe. This amount must be paid by 31 January if it is sent to you by 31 October of the previous year, or three months after the date of the letter if it’s received after 31 October.