What is the Pension Tax Allowance?
The Pension Tax Allowance is a reduction in income tax of up to £94 a year for people over State Pension age, starting on 6 April 2027. Anyone whose total income is no more than the full new State Pension of £13,036.40 gets all of it; above that it falls by £1 for every £3 of income and is gone at £13,318.40.
Status: announced, not yet legislated. The government announced it on 28 October 2026 and says the legislation will be in Finance Bill 2026-27. The figures here are for 2027/28 as announced.
How much it is
The maximum is the basic rate of 20% applied to the gap between the full new State Pension and the personal allowance: £13,036.40 − £12,570 = £466.40, and 20% of that is £93.28, which HM Treasury's explainer gives as up to £94. It is a reduction in the tax bill, not extra tax-free income, and the personal allowance stays at £12,570.
| Total income | Tax before | Allowance available | Tax after |
|---|---|---|---|
| £12,570.00 | £0.00 | £94.00 | £0.00 |
| £12,970.00 | £80.00 | £94.00 | £0.00 |
| £13,036.40 | £93.20 | £94.00 | £0.00 |
| £13,186.40 | £123.20 | £44.00 | £79.20 |
| £13,319.00 | £149.80 | £0.00 | £149.80 |
| £13,419.00 | £169.80 | £0.00 | £169.80 |
The reduction can never be more than the tax due, so it does not create a refund or a payment. The engine rounds taxable income down to the pound, which is why the tax before the allowance in the third row is a few pence under £93.28.
Who gets it
- People above State Pension age, and people who reach it during the tax year.
- The test is total income from every source: the State Pension, private pensions, earnings, self-employment, savings, property and dividends. Income inside an ISA is not counted.
- Receiving the State Pension is not a condition. Someone who has deferred it can still qualify on income from other sources.
- There is no claim to make. HMRC applies it from the information it holds on age and income, through tax codes for income paid under PAYE and in the calculation for anyone who files a Self Assessment return.
- It belongs to one person and cannot be passed to a partner.
- Scottish taxpayers get it too. The explainer says it is calculated with the 20% basic rate, not the Scottish starter rate.
The taper and where it ends
For each £3 of total income above £13,036.40, £1 of the allowance is withdrawn. With £13,186.40 of income, £150 is over the line, so the allowance is £94 − £50 = £44.
The whole £94 is withdrawn once income is £282 above the full new State Pension, which is £13,318.40. The explainer states the limit in whole pounds, as £13,319. Above that point income tax is worked out exactly as it would be without the allowance.
How long it lasts
The policy paper covers the tax years 2027/28 to 2029/30. In the later years the full amount is uprated in line with the full new State Pension, and the government says it will consider what follows in the usual way. The rules file holds figures for 2027/28 only, so this page shows no amounts for the later years.
The explainer gives the reason for the measure: from 2027/28 the full new State Pension rises above the personal allowance, and some pensioners would otherwise receive a bill for a small amount of tax for the first time.
Sources
The gov.uk pages this guide relied on, read on 9 November 2026.
- Pension Tax Allowance explainer (HM Treasury)
- Reduction in Income Tax for eligible pensioners (HMRC policy paper)
The figures are computed when the site is built from the rules file for 2027/28. Status: announced. Each value, its source and the date it was checked: rates for 2027/28.