Politics

Martin Lewis Warns Millions Could Start Paying Tax on Their State Pension and People Are Furious

Published on July 11, 2025

Martin Lewis is once again stepping in to clear up confusion and calm growing fears after being flooded with messages from people worried they might end up being taxed on their state pension next year.

The popular money-saving expert explained that the concern is down to the personal tax allowance threshold staying frozen at £12,570. This threshold has been stuck since 2021 when it was locked in by the Conservatives, and Chancellor Rachel Reeves hasn’t hinted at any changes either. In fact, it looks like it could stay frozen until 2028, if not longer.

Martin pointed out how this situation leads to what’s called ‘fiscal drag’ – basically, when wages or pensions go up due to inflation, but the tax threshold doesn’t move. So even if your income hasn’t changed much in real terms, more of it can end up being taxed.

The triple lock system, which boosts pensions each year based on either inflation, wage growth or 2.5% (whichever is highest), could now mean some pensioners end up crossing the tax threshold without having any other source of income, reported the Mirror.

Addressing the issue, Martin said, “I’m getting quite a few people getting in touch concerned ‘The State Pension will start to be taxed’ on the back of newspaper articles. I thought it worth making a few simple points to clear up possible confusions.”

He added, “So overall, the fact that ‘the State Pension alone may be taxable for some’, is primarily due to the freezing of the personal allowance and the significant annual increases in the State Pension.”

Martin didn’t shy away from the political reality either, saying, “One way politicians could prevent this would be to raise the personal allowance (for everyone or just for state pensioners). However, it’s worth noting that another solution could be to abolish the triple lock, so the State Pension doesn’t increase as much!”

He was quick to clarify he wasn’t taking sides politically, just trying to help people understand the situation. “I’m not trying to make any political point here. Just attempting to explain how it works as I’ve had quite a lot of questions.”

Meanwhile, there’s a growing campaign demanding a rise in the tax threshold, and it’s really picking up steam. Following a recent parliamentary debate, a petition calling for the personal allowance to be raised from £12,570 to £20,000 has gained huge support, according to Lancs Live.

The petition closed with a whopping 281,792 signatures, making it the second most signed petition on the government website, only behind one calling for a general election which has topped 3 million.

Campaigners behind the petition are asking the Treasury to raise the allowance so fewer pensioners and low earners are hit with income tax. They argue it’s unfair to tax those who are already struggling and say the move could also help people come off benefits and put more money into the economy.

They state, “We think it is abhorrent to tax pensioners on their state pension when it is over the personal allowance. We also think raising the personal allowance would lift many low earners out of benefits and inject more cash into the economy creating growth.”

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