Table of Contents
- HMRC annual figures show 8.51 million people receiving a state pension pay tax
- This brings the total to almost 9 million, compared with 4.9 million in 2010/11.
- Frozen income tax thresholds mean more people pay taxes
According to the latest figures from HMRC, more pensioners than ever now pay tax on their income.
The number of people over state pension age paying income tax increased from 7.85 million in 2023/24 to 8.51 million in 2024/25, an increase of 660,000.
This means there are now almost 9 million people aged 65 and over paying tax on their income, compared to 4.9 million in 2010/11.
More pensioners than ever are paying income tax on their pensions, according to HMRC
The huge increase in pensioners’ tax payments is largely due to the freezing of the income tax threshold, with the personal allowance of £12,570 frozen from 2021.
While the triple lock ensures the state pension rises in line with inflation, earnings or 2.5 per cent, maintaining the personal allowance freeze means a pensioner receiving the full state pension of £11,500 a year and some private pension income is liable to pay income tax.
Research from the Institute for Fiscal Studies shows that 65 per cent of people aged 65 and over pay income tax, up from 48 per cent in 2010/2011.
For the first time, pensioners are likely to pay more income tax than those aged 16 to 64 combined.
The Conservatives have promised to introduce a “triple lock plus” if elected, which would ensure pensioners pay no tax on the state pension.
They are committed to keeping the general rate, which is currently £11,500 a year, below the personal allowance.
Steve Webb, partner at LCP and pensions columnist for This Is Money, said: ‘These new figures from HMRC are very timely and help inform the debate about pensioners and tax.
‘They show that a combination of frozen tax thresholds and significant increases in state pensions means the number of pensioners paying tax has continued to rise.
‘But this is a continuation of a long-term trend that has seen the number of over-65s paying tax rise by around 4 million since 2010/11.
“For a pensioner in Britain, being an income tax payer is now the norm rather than the exception.”
Recent LCP research found that around 2.5 million pensioners currently have state pensions above the income tax threshold.
Of these, 2.1 million reached state pension age under the old pre-2016 system, and combined their second state pension, also known as SERPS, to form a more generous pension pot.
In total, in 2023/24 there were 8.4 million pensioners who reached state pension age before 6 April 2016 in the “old” state pension system, and 3.2 million who reached pension age after this date in the “new” state pension system.
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