## DWP Issues State Pension Warning for Pensioners with Additional Income
The Department for Work and Pensions (DWP) has issued a warning to pensioners regarding potential tax liabilities for those earning above a modest threshold, following this year’s increase in the State Pension. With the latest rise, many recipients now find themselves edging closer to the personal allowance for income tax, making it crucial for retirees to review their financial arrangements.
From April, the State Pension saw a 4.1% uplift as a result of the government’s ‘Triple Lock’ system, a policy that ensures pensions increase each year by either average earnings, inflation, or 2.5%—whichever is highest. This move has brought the full new State Pension up to £230.25 per week, translating to an annual total of £11,973. However, this figure is now just £597 short of the personal tax-free allowance, which stands at £12,570 per year.
This narrow gap means that any pensioner receiving the full State Pension and additional income such as part-time work, rental earnings, or other pensions now risks breaching the tax-free threshold. Once total annual income crosses £12,570, a basic rate tax of 20% is levied on every pound above this limit. For those whose income surpasses £50,270, a higher 40% rate applies.
The Low Incomes Tax Reform Group has called on the DWP and HM Revenue & Customs (HMRC) to do more to ensure pensioners are properly informed about these tax implications. In a statement, the group urged the authorities to provide clearer warnings to help retirees avoid unexpected tax bills, suggesting that details of potential tax liabilities and collection methods be included in the annual paperwork pensioners receive about their payments.
Many financial experts have echoed this advice. Speaking recently, consumer champion Martin Lewis addressed common concerns about whether increasing your State Pension could leave you worse off. On his podcast, Lewis clarified: “You only pay 20 per cent on the amount above the threshold. So if you gain £1,000, even if you’re taxed £200, you’ve still £800 better off. Taxation is only on the extra amount; you’re still earning more overall.”
However, the issue is nuanced for those on the very lowest incomes. Pensioners eligible for Pension Credit, who may not have other sources of income, are ‘topped up’ by this benefit to at least the full State Pension amount. In such cases, if someone is considering making voluntary contributions to secure a full State Pension, they should review whether Pension Credit would have awarded them a similar amount anyway.
As the State Pension continues to rise in line with the Triple Lock formula, the likelihood grows that more individuals will need to consider the broader tax landscape and potentially make declarations to HMRC. For those unsure of their situation, the recommended advice is to consult a financial advisor or use online tax calculators to estimate liabilities and check eligibility for Pension Credit or other supports.
Both the DWP and independent experts stress that being taxed should not be viewed negatively, but rather as a sign that your income has passed a healthy threshold. For the majority, this tax is only paid on the proportion above the personal allowance, and it does not erase the benefit of increased earnings.
In light of these developments, there is a growing expectation that government agencies will take further steps to communicate these changes proactively. Clearer annual notifications and dedicated information campaigns are being encouraged, to help the UK’s pensioners manage their finances confidently and avoid unwelcome surprises when it comes to tax time.
Those who might be concerned about their individual circumstances are urged to seek guidance sooner rather than later and to take advantage of resources provided by HMRC, the DWP, and financial charities. As the landscape of State Pension income changes, being prepared will be key for millions of retirees across the country.