More pensioners dragged into income tax

There were 7.13m taxpayers of pension age for the 2022/23 tax year, a 6% increase year on year, according to the latest data from HMRC. With the State Pension increasing alongside frozen personal allowances, increasing numbers of pensions are finding themselves paying income tax on their pension. Shaun Moore, tax and financial planning expert at Quilter, said the number of pensioners paying income tax is likely to continue to rise. He said: “In the 2022 to 2023 tax year, the full rate of the new state pension was £185.15 per week, or £9,627.80 per year, which utilised just over three quarters of the £12,570 personal allowance. Comparatively, in the 2025 to 2026 tax year, the full new state pension has risen to £230.25 per week or £11,973 per year. This uses 95% of the personal allowance, leaving just £597 of available income before someone starts paying income tax. This increase in the state pension will no doubt have resulted in a considerable proportion of pensioners being dragged into paying tax. “With the triple lock still in place, if the state pension continues to rise by at least 2.5%, by the 2027 to 2028 tax year the state pension will surpass the £12,570 personal allowance and will see all pensioners in receipt of the full new state pension forced to hand some of it back. “Pensioners are often among the worst hit by frozen tax allowances because they typically will be getting their income from a number of different investments and therefore lean heavily on CGT and dividend allowances to help create a retirement income in addition to their pension.” Today’s income tax statistics also highlighted the continuing gender pay gap. Across all age groups, the median income was £31,100 for males and £25,500 for females – a huge difference of almost 20%. There were also more male than female taxpayers in every age range and males had higher median income throughout. In 2022/23 21,000 men earnt over £1m and 40,000 earnt over £500,000, compared to just 4,000 and 9,000 women respectively. Women were also considerably more likely than men to be earning £12,700-£15,000 in total income, the lowest income band, while men took the lead in every other higher income band. Overall in 2022/23 there were 34.5m taxpayers, 19.1m of which were male and 15.4m of which were female. This represents an increase of 1.5m taxpayers year on year. Additional rate taxpayers, totalling 5.7m individuals, contributed 68.7% of the UK’s income tax revenue during the year.

More pensioners dragged into income tax - HMRC stats

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