More than 10 million state pensioners are being forced to pay income tax, according to new HMRC data, marking a rise of over three million in just five years. The figures reveal that seven in ten pensioners across Britain are now classed as taxpayers, a trend that former pensions minister Steve Webb describes as showing no sign of slowing down.
Record numbers of taxpaying pensioners
In 2023/24, 8.58 million over-65s paid tax, up from an original estimate of 8.25 million. By 2025/26, that figure is expected to hit 9.57 million, and for 2026/27, HMRC now predicts 10.2 million pensioners will be paying income tax. Steve Webb, partner at pension consultants LCP and former Liberal Democrat and Conservative coalition government pensions minister, said: “The surge in older people paying income tax is continuing, with record numbers of taxpaying pensioners in 2026/27.”
Frozen allowances and rising state pension
Webb attributed the increase to the extension of the freeze in personal allowances combined with continued generous indexation of the state pension. “Even more people in retirement can expect to become taxpayers for the first time in the coming years,” he added. The income tax threshold currently stands at £12,570 and is set to remain frozen until 2030, while the standard rate of the new state pension is expected to reach £12,548 per year by April 2027.
Impact on those solely dependent on state pension
At that point, someone wholly dependent on the new state pension would start to receive an annual tax bill from HMRC via the ‘Simple Assessment’ process, though they would not need to file a tax return. The estimated bills are: £88 in 2027/28, £153 in 2028/29, and £220 in 2029/30. To avoid such bills, the Labour Party chancellor announced in the Budget a special scheme ensuring that, for the rest of this Parliament, no one in this position would be charged income tax.
