Millions of pensioners in the United Kingdom face an increased risk of falling into a tax liability as the state pension is set to rise above the current income tax threshold next April, according to recent analysis. Despite promises from Labour figures to shield older recipients from new tax burdens, experts warn the majority of pensioners may still end up paying income tax on their state pension for the first time.

Official data indicates that, driven by the triple lock mechanism that guarantees the state pension’s annual increase by the highest of inflation, earnings growth, or 2.5 percent, the pension is expected to go up by at least 3.9 percent next year. This increase would push the average state pension above the £12,570 income tax threshold for the first time, reaching just over £13,000.

The government has pledged to protect those pensioners reliant solely on the basic state pension, but precise details on how this will be achieved remain unclear. Downing Street acknowledged the issue but did not specify how many people would benefit from the forthcoming measures, which are due to be outlined in next month’s Budget. Chancellor John Healey faces mounting pressure to demonstrate fiscal responsibility and reassure financial markets amid concerns over public borrowing costs.

Former Bank of England economist Andy Haldane, who has advised Labour leader Andy Burnham, cautioned that without credible plans to reduce government spending, markets may continue to penalize the UK with rising borrowing rates. Haldane criticized the current administration’s approach as rooted in traditional tax-and-spend policies.

While the Prime Minister’s office has stated that no pensioner relying solely on the basic state pension will pay income tax during this Parliament, former pensions minister Sir Steve Webb suggested this protection may extend to only a small fraction of pensioners. Webb, now a partner at pension consultancy Lane Clark & Peacock, estimated that just one in 16 pensioners would be fully shielded, leaving the vast majority subject to taxation. He also noted that older pensioners on the pre-2016 state pension system could be excluded entirely from relief efforts.

The emerging tax risk stems from the ongoing freeze on income tax thresholds instituted by the previous Conservative government to help fund Covid-related expenses, a policy extended by former Chancellor Rachel Reeves until 2031. This freeze has been described as the largest stealth tax in history, gradually pulling more taxpayers, including pensioners, into higher tax brackets despite nominal income increases.

During the June Makerfield by-election, Burnham acknowledged concerns from pensioners about the personal allowance freeze effectively eroding their income gains and indicated an interest in exploring targeted protections. However, since taking office, his administration has reverted to a narrower approach echoing Reeves’s earlier proposals, which primarily assist those pensioners without supplementary income.

Lane Clark & Peacock’s analysis found that fewer than 20 percent of the 5.5 million individuals receiving the new state pension would be fully protected from tax under current government plans. Meanwhile, none of the 7.7 million pensioners on the older pension, which averages under £10,000 annually, are expected to receive direct help. Many of these individuals supplement their income through additional state or private pensions but remain vulnerable due to eligibility criteria tied to reliance on the basic state pension alone.