More than 100,000 pensioners will face their first tax bill since retirement

Around 140,000 pensioners are set to receive their first tax bill since retirement due to the ‘tax burden’. The failure to adjust tax thresholds for inflation, wages and pensions means a record number of pensioners will be hit with a tax bill this year. The previous government’s decision to freeze the tax-free personal allowance at £12,470, the level set in 2021-22, results in more people being drawn into the tax each year.

This freeze is expected to remain until 2027-2028 under a policy adopted by Labour. The new State Pension stands at £11,502.40, while income from other sources such as dividends and private pensions can quickly push individuals over the Personal Allowance threshold. Recent figures released by HM Revenue and Customs (HMRC) showed that the number of Britons paying tax on their State Pension rose from 7.85 million to 8.51 million.

Former pensions minister Sir Steve Webb, now a partner at pensions consultants LCP, commented: “It is rarely good news to receive a letter from HMRC and in this case 140,000 pensioners will receive a tax claim over the next a few weeks for premiums since they retired, the size of the bill will often be relatively small at first, but this could increase year-on-year if the current policy of freezing tax thresholds continues.’

“The recipients of these letters are not well off and some will be living below the pensions industry’s assessment of the ‘minimum’ income required for a basic quality of life. There is also the risk that scammers will catch on to this fact. that these letters are sent and they come with fake letters trying to get money out of pensioners.”

HMRC said they will write to people who have taxable income but are not self-assessed or for whom we cannot automatically deduct the tax due through a PAYE tax code.

The letter said: “The letter will include a detailed calculation of any tax due on the income they received between April 2023 and April 2024. They will have to pay what they owe using simple assessment. For some, including around 140,000 pensioners who will receive a letter, this will be the first time they have received a simple assessment.”

It should be noted that people usually have until January 2025 to pay the bill. They can also pay in installments if they wish, provided they pay the full bill by the due date.