HMRC is dispatching brown letters to a record 9.5 million state pensioners born before 1960, alerting them to impending tax bills. The letters stem from frozen tax thresholds that have pulled nearly three million additional pensioners into the tax net since 2021-22.
Record Numbers of Taxpaying Pensioners
Data from HMRC show that 23.5% of all taxpayers are now above state pension age, up from 21.1% a decade ago. In 2026-27, 9.58 million pensioners are expected to pay tax, an increase of 500,000 from the previous year and 2.84 million more than in 2021-22 when thresholds were frozen.
Analysis by pensions consultancy LCP reveals that more than seven in 10 pensioners are now taxpayers. The personal tax-free allowance remains at £12,570 after the Labour government extended the freeze initiated by the previous Conservative government.
Impact of Frozen Thresholds
Sir Steve Webb, former pensions minister and partner at 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.”
Shaun Moore of wealth management firm Quilter added: “The Treasury has become increasingly reliant on the revenues generated by frozen thresholds. What began as a temporary measure has evolved into one of the most effective revenue-raising tools available to government, but the burden falls squarely on the shoulders of UK taxpayers.”
What Pensioners Should Do
Pensioners receiving the brown letters are advised to check their tax code and ensure they are not overpaying. Those with income solely from the state pension may not need to file a tax return if their tax is deducted at source. However, those with additional income from private pensions or investments may need to declare it. HMRC has urged pensioners to use its online tools to manage their tax affairs.
