This Budget protects pensioners and retirees on the lowest incomes and keeps help with energy bills in place. It also brings changes to inheritance tax and the State Pension that could affect your long-term plans.

A bigger State Pension, and a new tax allowance

In April 2027, the full new State Pension rises by 3.9% to £13,036 a year. Because the £12,570 Personal Allowance is frozen until 2031, that will be more than the tax-free allowance for the first time.

To prevent small tax bills, a new Pension Tax Allowance will apply from 2027/28 to 2029/30. During those three years, people whose only income is the State Pension won’t pay income tax. If you have a little other income, the protection falls by £1 for every £3 of it, and it stops altogether at around £13,320. Most retirees with a private pension will still pay some tax, so check that your tax code is right.

Help with bills

You’ll benefit from the same energy measures as other households. Ofgem aims to scrap the fixed daily gas standing charge by the end of 2027, moving the cost into the price of each unit, so savings will vary. From January 2027, homes in England in council tax bands A to D will get a £100 energy payment, with details of how it will be paid still to come. The 0% VAT rate on home electricity has been extended to July 2027.

Savings and rental income

From 6 April 2027, income tax on savings interest outside an ISA and on rental income rises to 24% for basic-rate, 44% for higher-rate and 49% for additional-rate taxpayers. That includes a further 2-point rise on top of the one set by last year’s Budget. If you live on interest or buy-to-let income, you’ll take home less. The £20,000 ISA allowance can still be used for cash, so try to move savings into an ISA each tax year.

Inheritance tax and your pension

From April 2027, most unused pension funds and death benefits will count towards your estate for inheritance tax. This was already set out in law before this Budget. The nil-rate bands stay frozen at £325,000 and £175,000 until 2031. If you’ve been leaving your pension untouched so you can pass it on, review that approach now. You might draw more from your pension and leave other savings untouched, or make gifts during your lifetime. Drawing more can raise your income tax bill, so have the numbers worked out for your own situation first.

There are two smaller improvements. First, pension death benefits paid on or after 28 October 2026 will no longer be taxed simply because they’re paid more than two years after the death. Second, retirees living abroad who are terminally ill can use medical evidence from outside the UK to get early access to their pension.

The triple lock

From 2030, the government plans to drop the earnings link from the triple lock, so pensions would rise by the higher of inflation or 2.5%. The government plans to put the money it saves towards a new National Care Service.

The bottom line

You’ll get some immediate help, but your long-term plans need a review. Check your will, the people you’ve nominated to receive your pension and the order in which you draw on your savings before April 2027.