The number of people 65 and older who paid income tax in 2023–2024 reached 8.5 million, representing a significant 10 per cent increase over the 7.73 million people who did so in the prior year, according to HMRC data.
The number of tax-paying retirees represented by this most recent statistic is now exactly double that of 2004–2005.
The total number of taxpayers, including all age categories, increased by 1.3 million to 35.9 million. Interestingly, this rise brought somewhat more women (0.7 million) than men (0.5 million) into the tax system. It is significant to note that the published figures’ rounding causes the subtotals to not add up exactly.
Meanwhile, more people are currently subject to higher tax rates. The number of people paying the highest “additional” rate of 45 per cent increased significantly from 555,000 to 862,000. Similarly, from 5.28 million to 5.59 million people paid the higher rate of 40 per cent.
The significant increase in taxpaying pensioners can be attributed to multiple factors, including the relatively substantial increase in the state pension starting from April 2023 as well as inflation-linked adjustments to other pensions.
LCP partner Steve Webb says: “The surge in the number of pensioners paying income tax shows that the policy of freezing tax thresholds is really beginning to bite. A combination of high inflation and frozen tax allowances means that well over 8 million people aged 65 or over are now paying tax, a doubling in the last two decades.
“The number of pensioners paying tax will continue to increase rapidly in years to come, particularly if inflation remains relatively high and thresholds continue to be frozen. The freezes also mean far more people now paying a top tax rate of 45 per cent which was previously intended only for the very richest”
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