DWP State Pension warning as 900,000 hit tax threshold 'for first time'

New Department for Work and Pensions ( DWP ) State Pension rates will leave an estimated 900,000 people in receipt of the State Pension needing to pay tax for the 2024/25 financial year.

New State Pension rates from April could see nearly one million older people paying tax in retirement. New Department for Work and Pensions ( DWP ) State Pension rates will leave an estimated 900,000 people in receipt of the State Pension needing to pay tax for the 2024/25 financial year.

A spokesperson for Spencer Churchill breaks down the impact of the State Pension uprating coupled with the current personal tax allowance threshold. The spokesperson said: “This year, up to 900,000 retirees, particularly those benefiting from the Marriage Allowance, might find themselves paying taxes on their State Pensions for the first time.

“This is a direct consequence of the substantial rise in State Pensions and the freezing of tax thresholds. It’s a significant change that requires careful financial review and planning.” The spokesperson said: “For those among the 900,000 affected, especially the elderly relying on the Marriage Allowance, it’s crucial to reassess your tax position.

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“With the new State Pension potentially pushing you over the personal allowance limit, you might face unexpected tax liabilities. It’s important to calculate if continuing to transfer part of your allowance to your spouse remains beneficial under these new conditions.”

The spokesperson said: “If you’re one of the many impacted by this change, start by reviewing your pension income against the frozen tax thresholds. Consider consulting a financial advisor to understand the best course of action – whether to continue with the Marriage Allowance or adjust your tax strategy to mitigate any potential financial strain.”

In a written response, the Treasury said that “the Personal Allowance is set at a level high enough to ensure that pensioners whose sole income is the New or Basic State Pension do not pay income tax” adding that the UK Government has “nearly doubled the income tax Personal Allowance since 2010 (30% higher in real terms), ensuring some of the lowest earners do not pay income tax”.