State pension set to rise £500 and top £13,000 a year from next spring - but with an income tax sting

See more This is Money on Google - save us as a Preferred Source Updated: 10:00 EDT, 18 August 2026 The full rate state pension is set to rise to £251 a week and top £13,000 annually from next spring under the triple lock guarantee.But unless the headline state pension is your sole income, you are likely to see at least some of that clawed back in income tax as it will bust the basic rate threshold of £12,570.The triple lock pledge means the state pension should increase every year by the highest of inflation, average earnings growth or 2.5 per cent.The latest wage growth figure published today was 4.1 per cent, while the most recent inflation figure was 2.6 per cent.The full rate new state pension for those retiring since 2016 therefore looks likely to rise from the current £241.30 to £251.20, amounting to a £500 a year increase from April 2027.People on the old basic state pension should see a rise from the current £184.90 a week to £192.50, or just shy of £400 a year. Triple lock: State pension increases every year by the highest of inflation, average earnings growth or 2.5 per centThose on the basic rate also get hefty top-ups, called S2P or Serps, if those were earned earlier in life, but that element of their state pension is hiked in line with inflation.The next average earnings growth number announced in September will be the one likely to decide the next state pension rise.As the latest Consumer Prices Index inflation figure was 2.6 per cent, unless there is an unexpected spike in prices before the key one announced in October, it can be dismissed as a factor this year.Will YOU pay income tax on your state pension?The full new state pension is currently £12,548 a year, which just nudges the level where people start paying income tax.This threshold is £12,570 and is set to be frozen until at least 2030-31, dragging more pensioners and taxpayers in general into paying income tax.This puts the Government in a bind, because if it keeps its popular triple lock promise - which it has promised to do for the whole of this parliament – that will push the headline state pension over the basic rate tax threshold for the first time.Anticipating this development, the Government announced at the last Budget that it would let older people off paying income tax if their only income is the state pension.We have so far had little detail on how this would work, but it seems no one who reached state pension age before April 2016 will be excused.And nor will younger pensioners with even £1 of private income on top of the state pension.Many people with any private work or personal pensions are already taxpayers, as are state pensioners who earned sizeable Serps or S2P during their working lives.Former Pensions Minister Steve Webb, who carried out a study showing only one in 18 pensioners will benefit from the new tax waiver, says the Government's plan is 'deeply flawed' and has called for more details to be released.Mr Webb, a partner at pension consultant LCP, says: 'Unless things change sharply in the next month, those on the new state pension can expect to see an increase of around £500 per year next April.'But the sting in the tail is that this will take the standard rate of the new state pension above the tax threshold.'We therefore urgently need to know how the government plans to fulfil its pledge to make sure that those wholly dependent on the new state pension will not be charged income tax next year.'Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, says: 'While an inflation-busting increase will be good news for pensioners, the fact remains that the state pension on its own does little more than cover the essentials.'If you want more from your retirement, then you need to make the most of your workplace and personal pensions.'SIPPS: INVEST TO BUILD YOUR PENSIONAJ BellAJ Bell0.25% account fee. Full range of investmentsHargreaves LansdownHargreaves LansdownFree fund dealing, 40% off account feesInteractive InvestorInteractive InvestorFrom £5.99 per month, £100 of free tradesInvestEngineInvestEngineFee-free ETF investing, £100 welcome bonusProsperProsperNo account fee and 30 ETF fees refundedAffiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.Compare the best Sipp for you: Our full reviews