Updated on 6 April 2026

How tax is collected on the state pension

The state pension is taxable. Here we look at how tax is collected on the state pension.

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Overview

The Department for Work and Pensions (DWP) does not operate Pay As You Earn (PAYE) on your state pension – so you receive it gross, without any tax taken off before it is paid to you.

If the state pension is your only income, it might be less than your tax-free allowances. This means you do not have to pay any tax on it.

If your state pension is more than your tax-free allowances, or if you have other income sources that take your total income above your allowances, you might need to pay tax.

There are a few ways that tax might be collected on your state pension, depending on your circumstances:

under the PAYE system, if you have a source of PAYE income (for example, a private pension or employment); or
under the Self Assessment system (if you complete a tax return); or
by HMRC issuing a Simple Assessment calculation after the tax year end.

We look at each of these methods in the sections that follow.

Collection of tax through Pay As You Earn

If your total taxable income, including your state pension, is greater than your tax-free allowances and reliefs, you will have to pay tax on the portion of your total income that exceeds your allowances. Check your coding notice to make sure you have been given the correct allowances and reliefs, and the amount of state pension included in your tax code is correct.

Example: tax on the state pension collected through PAYE

Donald receives a company pension income of £9,000 a year and a state pension. His state pension for 2026/27 is £11,500.

We work out what tax-free allowances can be set against Donald's company pension (once the state pension has been taken into account) like this:

	£
Personal allowance for 2026/27	12,570
Minus: state pension	(11,500)
Allowances to go against company pension	1,070

Assuming Donald has no other taxable income for the year, this means that of the £9,000 company pension he receives, Donald will pay tax on £7,930 (£9,000 - £1,070). This is because the state pension is taxable and is using up most of his personal allowance for the year.

Donald will probably find he is given a tax code 107L to collect this tax from his company pension under PAYE. As such, Donald should have total tax deducted under PAYE from his company pension of £1,586 for 2026/27. This is worked out by taking the leftover allowances of £1,070 from the company pension of £9,000. This leaves £7,930 of the company pension which is taxed at the basic rate of 20%.

We explain more about tax codes for state pension below.

HMRC will check how much tax you have paid after the end of the tax year. If too much or too little tax has been collected through PAYE, HMRC should issue a P800 tax calculation to deal with the difference.

Starting to receive state pension

When you are near the age when you can start receiving your state pension, the DWP will contact you about claiming your state pension. You can read more about reaching state pension age on our State pension page.

When you claim your state pension, the DWP usually notifies HM Revenue & Customs (HMRC) automatically, and gives them details of your state pension amount. This automatic notification should happen before you receive your first state pension payment.

If you pay tax under PAYE on another income source, such as a private or occupational pension, HMRC will use the information from DWP to update your tax code and include an adjustment for your state pension so that the tax due on your state pension is collected through the PAYE tax calculation. In the first year you get your state pension, you will likely receive payment for only part of the year. HMRC will normally include a full year's state pension in your PAYE coding notice and then tell your employer or pension payer to use a special type of code – called a week 1 or month 1 code. This should mean the correct part-year pension figure is taken into account in the PAYE calculation to make sure that you pay the right amount of tax.

If you don’t notice a change to your PAYE tax code after you have started to receive state pension, you should contact HMRC straightaway and check that they have received details of your state pension award from the DWP.

Example: starting to receive state pension part way through the tax year

Wes reaches state pension age on 5 October 2026, during the 2026/27 tax year. He starts to receive his state pension of £241.30 a week from that date (which would be the equivalent of £12,547.60 for a full year, but only £6,273.80 for the 26 week period 5 October 2026 – 5 April 2027).

His total taxable income is £14,000 including the state pension. He will only actually have to pay tax on £6,273.80 of state pension in 2026/27 (26 weeks’ worth), but the full £12,547 annual entitlement (rounded down) will be shown in his PAYE tax code.

To ensure tax is not overcharged, HMRC will tell his pension payer to operate the tax code on a month 1 basis, so that Wes is in fact only taxed on his part-year state pension entitlement (that is, the 26 weeks’ worth of pension that he was entitled to) for that year. If there is an overpayment or underpayment of tax at the year end, HMRC should sort this out after the tax year ends when they reconcile the record.

Collection of tax through Self Assessment

You will only usually pay tax on state pension income via the Self Assessment tax return system if you are required to complete a tax return for some other reason. Having taxable state pension income alone is not normally a reason to be in Self Assessment. You can read more about the Self Assessment criteria on our page Who has to complete a tax return.

Where you are required to complete a tax return, bear in mind that your state pension will still be included as an adjustment in your tax code, if you have a PAYE income source. However, any overpayment or underpayment of tax under PAYE would be sorted out via the Self Assessment calculation rather than by HMRC issuing a P800 or simple assessment calculation after the year end.

Collection of tax through simple assessment

If it is not possible for HMRC to collect the tax on your state pension through the PAYE system, and you are not otherwise required to complete a Self Assessment tax return, HMRC may instead send you a simple assessment calculation after the end of the tax year.

Example – tax on state pension collected via simple assessment

In 2026/27, Penny has state pension income of £13,500. This is her only income. Penny is entitled to the normal personal allowance of £12,570. Therefore, she needs to pay tax on the amount exceeding her personal allowance, which is £930.

As Penny does not have any income that is taxed through PAYE, HMRC are not able to collect tax on the taxable £930 amount during the tax year. HMRC receive information about Penny’s state pension for the year from the DWP and use this to calculate Penny’s tax liability after the tax year end.

Penny can expect to receive a simple assessment calculation from HMRC after the end of the tax year, asking her to pay tax of £186 (being £930 x 20%). This assessment should be issued by HMRC automatically. Penny will have until 31 January 2028 to pay the tax.

You can read more about simple assessment in our guidance.

Tax on arrears (back-payments) of state pension

In recent years the DWP has undertaken an exercise to review some people’s state pensions after finding out that its systems were wrong. The errors meant that the DWP had paid some people less state pension than it should have – so you may have received a back-payment.

There may be further instances where an error is discovered and you become entitled to a back-payment of state pension. For example, you may be entitled to a back-payment of state pension if you make a successful claim for historic Home Responsibilities Protection. This may be available to some parents of carers who claimed child benefit before May 2000. You can read about Home Responsibilities Protection in our separate guidance.

If you receive a back-payment, you need to know how it affects your tax.

We understand that the DWP will share information about the payments with HMRC to help you resolve any tax issues. Our information below will help you understand what should happen.

Back-payments of state pension that relate to an earlier tax year are taxable in the year you should have received them, not in the year they are actually paid.

You will only need to pay tax on the back-payments if your total income was more than your personal allowance for the relevant tax year. HMRC will only seek to collect income tax on any part of the back-payment relating to the current tax year and the previous four tax years. This means that for any back-payments received in 2026/27, HMRC will not collect tax on payments that relate to tax years before 2022/23.

We understand that the DWP will tell HMRC when a back-payment has been made. HMRC will then contact you if they think you owe some tax.

We also understand that HMRC will allow you to set up a Time to Pay arrangement if need be, rather than pay any tax all at once.

Example – back payment of state pension

Ellie lives in England. She receives a letter from the DWP in October 2026 saying that it has not paid her enough state pension. The DWP is sending her a back-payment of £1,620. Ellie has other taxable pension income. The lump sum and Ellie’s tax position is broken down as follows:

Tax year	Amount of state pension back-payment £	Other income	Personal allowance (PA)	Spare personal allowance (PA minus other income)	Taxable back-payment (back-payment minus spare PA)	Tax due on back-payment at basic rate 20%
2020/21	200	13,000	12,500	None – other income more than PA	0 (more than 4 years ago)	0 (more than 4 years ago)
2021/22	220	12,600	12,570	None – other income more than PA	0 (more than 4 years ago)	0 (more than 4 years ago)
2022/23	240	12,200	12,570	370	None – spare personal allowance is more than back-payment)	0
2023/24	260	12,400	12,570	170	90	18
2024/25	280	12,600	12,570	None – other income more than PA	280	56
2025/26	280	12,800	12,570	None – other income more than PA	280	56
2026/27	140	12,700	12,570	None – other income more than PA	140	28
Total back payment	£1,620				Total tax	£158

Death before back-payment is made

We understand in cases where the pensioner has unfortunately died prior to the back-payment being made, that the payment will go to the individual’s personal representatives or next of kin.

HMRC have told us that the tax position will vary depending on whether or not the pensioner receives a notification from the DWP that a back-payment is due before they died:

If both the notification of the back-payment and the payment itself are received after death, then HMRC will not collect income tax on the back payment. The payment will not be included as part of the deceased’s estate for inheritance tax purposes.
If the pensioner has been notified by the DWP that a back-payment will be made, but the payment is not actually received until after they have passed away, income tax will still be collected by HMRC (payable by the personal representatives). The payment will form part of the deceased’s estate for inheritance tax purposes.

You can read more information about the inheritance tax position of these payments in HMRC’s manuals.

Deferring your state pension

When you reach state pension age, you might decide not to claim straight away. This might particularly be the case if you are still working. We discuss this more on our page Putting off (deferring) claiming the state pension. We discuss the tax implications of receiving a deferred state pension lump sum on our page Tax on deferred state pension lump sums.

During the period of state pension deferral, you do not pay any tax on your state pension, as you are not claiming or receiving it.