The UK's Department for Work and Pensions (DWP) is set to increase the state pension by 4.8% in April 2026, raising the full new annual amount to approximately £12,590. While this boost offers welcome relief for millions of retirees, it also brings them closer than ever to the income tax threshold, prompting questions about future tax liability and how HMRC calculates pension income.
The increase follows revised wage growth figures from the Office for National Statistics (ONS), which showed average earnings—including bonuses—rose by 4.8% between May and July 2025. Under the government's triple lock policy, pensions rise each year by the highest of inflation, wage growth, or 2.5%. With inflation currently hovering around 3.8%, earnings are expected to be the benchmark for the April 2026 adjustment.
