Taxman gets third of retired households' income, study reveals

Retired households paid the equivalent of £45.6 billion in taxes over a year, new research has found, with the average retiree family paying out 30 per cent of annual income to the taxman. The analysis of Government data by Prudential found that in the 2011-2012 tax year the average retired household paid £6,400 in tax from a gross income of £21,300. That equated to a total of £45.6 billion paid in taxes by all retired households.The average retired household pays out 30 per cent of its annual income in a combination of direct and indirect taxes, according to the study.Stan Russell, retirement income expert at Prudential, said: "Retiring from work doesn't mean that you are retiring from paying tax."These latest figures are a stark reminder that not all the income you receive in retirement will be yours to spend as you like."{desktop}{/desktop}{mobile}{/mobile}VAT and income tax were the largest duties retirees found themselves paying – each consuming eight per cent of the average retired household's annual income – council tax also accounted for around four per cent. Indirect taxes other than VAT, including vehicle excise duty, taxes on alcohol, tobacco and petrol, combined to take a further 10 per cent.Of the 30 per cent of its annual income that the average retired household paid in tax, just under three fifths (£3,800) was in indirect taxation. As such, retired households with lower incomes were likely to find themselves paying out a greater proportion of those incomes in tax.Mr Russell said: "The changes to pensions and how people can take their retirement income announced in the Budget will provide savers and retirees with more choices and will affect the way that tax is applied. "Irrespective of these changes, the fundamental principles remain true – the best way to secure your desired level of retirement income is to save as much as possible as early as possible in your working life."

Taxman gets third of retired households' income, study reveals

Related items

News from Twitter