Taxation of UK state pension

The state pension is in the news and creating a major headache for the government. It made a manifesto commitment that the triple lock – whereby the pension rises in line with the highest of average earnings growth inflation or 2.5% each year – would be maintained throughout the life of this parliament. Unfortunately this fails to work as planned when wages collapse under the coronavirus pandemic and then bounce back again. Even Steve Webb pensions minister in the coalition government and architect of the triple lock accepts that this must now change. So perhaps this makes it good time to consider how the state pension is taxed.

The law and guidance

Although many pensioners assume that the state pension is received tax free Taxation readers know otherwise. Unlike most other sources state pensions are taxed on an...