Millions of older people in receipt of the New or Basic State Pension are set for a significant boost this year after Chancellor Jeremy Hunt confirmed that payments will rise by 8.5 per cent from April 8, 2024. This means that someone on the full New State Pension will see payments go up from £203.85 per week to £221.20 and as payments are typically made every four weeks, this amounts to £884.80 each pay period.
Over the 2024/25 financial year, this is an increase of £902, taking the annual income from State Pension alone from £10,600 to £11,502. Similarly, someone on the full rate of the Old or Basic State Pension will see payments go up from £156.20 per week to £169.50 - this amounts to £678 each pay period. During the 2024/25 financial year, this is an increase of £692, taking the annual income from £8,122 to £8,814.
It's important to note that even though weekly rates will rise, pensioners will not see the full amount reflected in their payments until four weeks after the increase date as the State Pension is paid in arrears. Until a full payment cycle has passed, they will receive a blend of old and new payment rates.
The increase of 8.5 per cent is due to the earnings growth measure of the Triple Lock. Under the Triple Lock, the State Pension rises each year in line with inflation, earnings or 2.5 per cent - whichever is higher.
The measures that influenced the 2024/25 uprating areas follows:
- Average annual earnings growth from May to July - 8.5%
- Consumer Price Index (CPI) inflation in the year to September - 6.7%
- 2.5%
The personal tax allowance threshold will remain frozen at £12,570 during the 2024/25 financial year, which means that older people with an income of more than £242 per week may have to pay income tax.
Over the 2024/25 financial year, the full New State Pension will be worth £11,502, leaving just £1,068 before the personal tax threshold is exceeded, so anyone with additional income of £89 or more per week - on top of State Pension - may receive a tax bill the following year.
Similarly, someone on the full rate of the Old or Basic State Pension will see annual payments go up £8,814. This leaves just £3,756 before the personal tax threshold is exceeded, equivalent to additional income totalling £313 per month.
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Shortly after the Autumn Statement announcement in November, consultants LCP (Lane Clark & Peaco*ck) warned that growing numbers of pensioners could be dragged into the tax net based purely on a State Pension, adding that there is no automatic way of collecting the tax that they owe, because State Pensions are paid in full, before the deduction of tax.
In such cases, HM Revenue and Customs (HMRC) could operate a system known as ‘simple assessment’.
Under ‘simple assessment’, the Department for Work and Pensions (DWP) would notify HMRC at the end of a tax year how much State Pension people have received. If this takes someone over the income tax threshold, there would then be a tax bill to be paid.
LCP said HMRC may write to the pensioner after the end of the tax year telling them that they have not paid the tax due on their State Pension and requiring them to make a payment before January 31 the following year.
The pension experts warned that pensioners could have received - and spent - all of their pension during one financial year only to receive a tax bill on that pension the following year.
For pensioners who have a State Pension and a private pension, the state will collect any tax due through the code applied to the private pension.
The income tax threshold has been frozen at £12,570 since 2021/22.
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State Pension payment rates from April 8, 2024
The calculations below show the current annual rates for the full New and full Basic State Pensions. The State Pension is usually paid every four weeks with 13 payments made throughout the year.
How much someone receives depends on the number of years worth of National Insurance contributions they have made - around 35 is needed for the full New State Pension, but this may be more if you were contracted out - find out more here.
Full New State Pension | Current | From April 8 |
Weekly payment | £203.85 | £221.20 |
Four-weekly pay period | £815.40 | £884.80 |
Annual amount | £10,600 | £11,502 |
Full Basic State Pension | Current | From April 8 |
Weekly payment | £156.20 | £169.50 |
Four-weekly pay period | £624.80 | £678.00 |
Annual amount | £8,122 | £8,814 |
Full details on Additional State Pension, increments and Invalidity Allowance can be found on GOV.UK here.
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