HMRC figures present 8.16 million pensioners paid revenue tax in 2023-24, over 1,000,000 greater than the earlier 12 months
Extra pensioners than ever earlier than are paying tax (Picture: Getty)
The variety of pensioners paying revenue tax has surged by greater than 1,000,000 in a 12 months, with a minimum of 22 per cent of taxpayers now aged over state pension age.
HM Income & Customs figures launched at present for the 2023-24 tax 12 months reveal that there have been 8.16 million taxpayers aged over 66, up from 7.14 million the earlier 12 months. The sharp improve got here as state pension rises and frozen revenue tax thresholds pushed extra aged folks into paying 20 per cent fundamental fee tax on their retirement revenue.
We use your sign-up to offer content material in methods you have consented to and to enhance our understanding of you. This will likely embrace adverts from us and third events based mostly on our understanding. You possibly can unsubscribe at any time. Learn our Privateness Coverage
The variety of folks of all ages paying 45 per cent additional-rate tax rocketed 57 per cent from 569,000 in 2022-23 to 893,000 in 2023-24. This was predominantly because of the additional-rate threshold being slashed from £150,000 to £125,140 in April 2023.
The fundamental and higher-rate revenue tax thresholds have remained frozen at £12,570 and £50,270 since 2021. All three thresholds are scheduled to remain unchanged till 2031, that means that as salaries improve, rising numbers of individuals shall be pulled into increased tax brackets.
Some 2.17 million extra folks paid basic-rate revenue tax in 2023-24 than the 12 months earlier than, whereas the variety of 40 per cent higher-rate taxpayers rose 12.8 per cent (654,000) to five.76 million.
A full new state pension is price £12,548 yearly – £22 beneath the essential fee tax threshold, also referred to as the tax-free private allowance. Because of this pensioners with even modest supplementary revenue now face a tax invoice. Subsequent 12 months, anybody receiving the total state pension might need to pay revenue tax on their funds as a result of the triple lock ensures that they are going to go up in keeping with wages, inflation or by 2.5 per cent — whichever is highest.
In November, Chancellor Rachel Reeves pledged that pensioners whose sole revenue was the state pension wouldn’t face any tax legal responsibility on it. Nevertheless, the exact mechanics of how this shall be applied stay unclear.
Dennis Reed from the pension marketing campaign group Silver Voices mentioned: “These figures are not any shock. Annually the frozen decrease revenue tax band implies that increasingly older individuals are being dragged into the tax system. “By the tip of this parliament the overwhelming majority of retired folks on this nation shall be paying tax – this can be a stunning state of affairs. Most retired folks aren’t incomes revenue from work so what’s being taxed is the state pension and any additions to the state pension reminiscent of a widows’ pension or a small personal or occupational pension.
“Simply £20 to £30 additional a month can push you into being taxed and when individuals are struggling anyway with the price of residing the very last thing they want is to be taxed too.”
HMRC confirmed {that a} revised methodology was launched for the 2023-24 tax 12 months, accounting for 196,000 of the extra million pensioners now topic to taxation. The tax authority additional famous that shifting demographics, coupled with rising pensioner incomes, had been answerable for the rise.
Rachael Griffin from wealth supervisor Quilter mentioned: “These figures present how frozen tax thresholds are fully reshaping the tax profile of the nation. Provided that we aren’t anticipating to see any adjustments to thresholds till 2031, these dynamics look set to accentuate somewhat than unwind. “This shift is now not confined to historically excessive‑paid professions. Skilled academics, senior nurses and cops are more and more being pulled into increased‑fee tax via incremental pay rises, additional time or development, somewhat than genuinely excessive earnings. What was as soon as a marginal challenge is now turning into a mainstream expertise throughout giant components of the workforce.”
Leave a Reply