More than 10 million people aged 65 and over are now paying income tax for the first time on record, according to new figures published by HM Revenue and Customs (HMRC).
The latest estimates suggest the number of taxpaying over-65s has risen by more than three million since the personal allowance was frozen at £12,570 in 2021.
The new figures mean that more than seven in 10 people receiving the State Pension are now income taxpayers.
The increase has been driven by a combination of frozen income tax thresholds, annual rises to the State Pension and growth in the number of pensioners.
Former pensions minister Steve Webb, partner at pension consultants LCP, said: "The surge in older people paying income tax is continuing, with record numbers of taxpaying pensioners in 2026/27.
"The recent extension of the freeze in personal allowances, combined with the continued generous indexation of the state pension means that even more people in retirement can expect to become taxpayers for the first time in the coming years".
Why are more pensioners paying tax?
The personal allowance – the amount people can earn before paying income tax – has remained frozen at £12,570 since the 2021/22 tax year.
At the same time, the State Pension has continued to rise each year under the triple lock, while many pensioners also receive workplace or private pensions that count as taxable income.
HMRC's latest estimates, detailed here, show:
- Around 7.1 million over-65s paid income tax in 2021/22.
- That figure is expected to reach 10.2 million in 2026/27.
- The number of taxpayers above State Pension age is forecast to reach 9.58 million this year.
State Pension tax changes are coming
The figures come ahead of another significant milestone.
From April 2027, the full rate of the new State Pension is expected to exceed the personal allowance for the first time.
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That means people relying solely on the full new State Pension could technically become liable for income tax.
Last year, the Government announced it would introduce a system to ensure those pensioners do not have to pay tax purely because the State Pension exceeds the tax-free allowance.
However, details of how that system are not yet clear, and the latest HMRC figures highlight how fiscal drag is bringing increasing numbers of pensioners into the income tax system without any change to tax rates.
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