HMRC issues warning to millions of pensioners

Around nine million pensioners are expected to pay income tax next year, amid warnings that a growing number of older people are losing their money to taxation. Freezing tax brackets has seen hundreds of thousands of pensioners fall out of the income tax bracket, prompting calls for the new Labor government to tackle the issue.

The State Pension has seen increases in recent years, causing many older people to fall into the new tax bands through no fault of their own. It is estimated that 8.95 million pensioners will pay income tax by April next year – a significant increase from 4.9 million in 2011.

Financial experts have described this as another burden facing retirees in the wake of the pandemic and cost of living crisis, reports Birmingham Live. Andy Wood, from Tax Natives, said: “The number of pensioners paying income tax has seen a worrying rise.

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“In the 2023/24 tax year, 8.27 million people aged 65 and over paid income tax. This number is expected to rise to 8.95 million in 2024/25, a significant jump from 4.9 million in 2010/11, marking a major shift. in the fiscal burden on elderly citizens.

“Frozen tax thresholds, together with significant increases in state pensions, mean that for many pensioners, paying income tax has become the norm rather than the exception. This long-term trend highlights the continuing impact of fiscal policies on the aging population.”

“This long-term trend highlights the continuing impact of fiscal policies on the aging population. The pandemic and cost-of-living crisis have fueled wage growth, but tax thresholds have barely adjusted.

“The higher rate tax bracket has only increased by £270 from 2021/22, which is insufficient given the economic changes we have experienced. By not adjusting income tax brackets during periods of high inflation and rising wages, more people end up paying taxes.

“In the 2024/25 tax year, around 29.5 million people are expected to pay the standard rate of tax, up from 28.8 million the previous year. total of 6.31 million people paying at this higher rate.”