UK pensioners to face income tax on state pensions

More than nine million people over the age of 66 will face a new "retirement tax" starting in April 2026. This will happen due to frozen tax thresholds and a rising state pension. Experts predict the state pension will increase by approximately 5.5% next year, surpassing the personal tax allowance of £12,570 for many pensioners. Those who rely solely on the full new state pension will have to pay around £12 in tax. Additionally, pensioners with other incomes, such as jobs or private pensions, will also be taxed. There are strategies to help reduce this tax burden, according to financial experts. One recommendation is to use an Individual Savings Account (ISA), which allows tax-free savings up to £20,000 per year. Withdrawals from an ISA are also tax-free. Experts suggest pensioners use ISAs to boost their income without increasing their tax bill. Another tip is to manage private or workplace pensions carefully. Pensioners can withdraw 25% of their pension tax-free, either as a lump sum or in smaller amounts. This can supplement state pension income without incurring taxes. Couples may also benefit from the Marriage Allowance, allowing a non-taxpayer to transfer part of their personal allowance to a basic-rate taxpayer spouse. This could result in overall tax savings for the couple. Currently, the state pension age is 66, but it is set to rise to 67 by 2028 and 68 by 2046. The amount received from the state pension depends on a person's National Insurance record. To qualify for the maximum new state pension, a person must have 35 qualifying years.