Hundreds of thousands of retirees are set to pay tax on their state pension for the first time next year due to the combination of a significant pension increase and frozen tax thresholds.

The state pension is expected to rise by £473 in 2025 under the triple lock, which guarantees that the pension increases annually in line with the highest of inflation, wage growth, or 2.5 percent.

This boost will take the annual pension from £11,502 to £11,975. However, with the personal tax allowance frozen at £12,570 until 2028, many pensioners will now find their total income exceeding the tax-free threshold, making them liable for income tax.

More than 300,000 retirees are expected to receive letters from HMRC informing them they need to start paying tax on their state pension, up from the 140,000 originally expected.

This shift marks a significant change for pensioners who previously didn’t reach the taxable income level.

Alice Haine from Bestinvest explained: “With frozen tax thresholds and the full state pension nearing the personal allowance, pensioners are edging closer to the point where their pension income becomes taxable.

“Retirees already receiving a higher state pension may already be paying tax on the benefit, while those receiving a private pension income will see more of that swallowed up by tax.”

Chancellor Rachel Reeves is reportedly planning a new stealth tax in the upcoming Budget, extending the income tax threshold freeze from 2028 to 2030.

This threshold freeze is equivalent to a 1p rise in the basic rate of income tax, raising £7billion annually.

In line with the triple lock pledge, this will likely push the full state pension over the income threshold for the first time by 2028.

Ms Reeves will unveil the new Labour Government’s Autumn Budget on Wednesday, October 30.