Pensioners Hit with Tax Bill Thousands More Now Paying Income Tax

It’s bad news for many pensioners – more than half a million more are now paying income tax, according to the latest figures from HMRC. This means thousands of people are now having to hand over a chunk of their pension to the taxman, leaving less for essentials and enjoying their retirement.

The number of pensioners paying income tax has risen dramatically in recent years. In 2024/25, 8.51 million pensioners over the age of 65 paid income tax, compared to 7.85 million in 2023/24. This is a huge jump of 660,000 people!

Even more shocking, back in 2010/11, only 4.9 million pensioners were paying income tax. This means that almost 9 million pensioners are now paying income tax – that’s nearly double the number just over a decade ago.

Why Are More Pensioners Paying Tax?

This isn’t just bad luck. The main reason for the surge in pensioners paying income tax is the government freezing the personal allowance. This is the amount of money you can earn before you start paying tax. It’s been stuck at £12,570 since 2021!

At the same time, pensions have been increasing. The “triple lock” means the state pension rises in line with inflation, earnings, or 2.5%, whichever is higher. This means many pensioners are now earning above the personal allowance, even if they only have the basic state pension and a small private pension.

Pensioners Paying More Than Working Age People

Things are getting so bad that some pensioners are now likely to pay more income tax than working age people. This is a huge change from just a few years ago. Research by the Institute of Fiscal Studies shows that 65% of pensioners are now paying tax, compared to just 48% in 2010/11.

Pensioners Who Don’t Pay Tax

It’s not all bad news for pensioners, though. Around 2.5 million pensioners currently have state pensions above the income tax threshold, meaning they don’t have to pay tax on it. Many of these reached pension age before 2016 under the older state pension system and have built up a generous pension pot.

Key Facts

  • More than half a million more pensioners are now paying income tax.
  • The number of pensioners paying income tax has almost doubled since 2010/11.
  • The frozen personal allowance is the main reason for the increase.
  • Pensioners are now likely to pay more income tax than working age people.
  • The Conservatives have promised to introduce a “triple lock plus” to help pensioners.

This is a worrying trend for pensioners, many of whom are already struggling to make ends meet. It’s important to be aware of how these changes could affect your finances, and to plan accordingly.