The number of pensioners paying income tax has risen to 8.51mn in 2024-25, according to HM Revenue and Customs.
The figures published today (June 27) by HMRC in its annual update of the number of pensioners paying income tax reported a 660,000 increase from 2023-24 when the figure sat at 7.85mn.
Since 2020-21, the number of pensioners paying tax has also increased by more than 2mn, from 6.47mn to 8.51mn.
There are now also 8.9mn taxpayers aged 65 and over, compared with 4.9mn in 2010-2011.
Steve Webb, partner at LCP, said: “These new figures from HMRC are very timely and help to inform the debate about pensioners and tax. They show that a combination of frozen tax thresholds and significant increases in the state pension means the number of pensioners paying tax has continued to soar.
“But this is a continuation of a long-term trend which has seen the number of over 65s paying tax rise by around 4mn since 2010-11. For a pensioner in Britain, being an income taxpayer is now the norm rather than the exception”.
This comes after additional research from LCP last week (June 21) found that nearly 2.5mn pensioners will still pay tax on their state pension after the implementation of the proposed “triple lock plus” policy by the Conservatives.
As the standard rate of the new state pension is currently below the standard personal allowance, this policy would ensure that pensioners whose taxable income consisted exclusively of a new state pension would have no income tax liability.
However, LCP’s research showed there is “huge diversity” in the amount of state pension which people receive.
Additionally, the research warned that an excessive focus on the single figure of the standard new state pension may miss a “significant” group of pensioners who receive much more than the standard amounts.
Frozen bands
Helen Morrissey, head of retirement analysis, Hargreaves Lansdown said frozen tax thresholds were "biting down hard" on pensioner incomes.
"With the number of people over state pension age paying tax surging by 26 per cent since 2021/22. This is due in part to pensioners having larger incomes in retirement – for instance they may continue to work or have larger pensions, and this is a positive.
"However, we can’t ignore the fact that the deep freeze on tax thresholds is dragging more pensioners into taxpaying territory, and many will be struggling as a result.
"With the freeze set to last until 2028, there’s every chance that by the time we emerge from this, even people dependent on the full new state pension may find they are paying tax on it.
"It’s been a key battleground during this general election campaign, with the Conservatives pledging to raise the pensioner tax threshold, so that someone dependent on a full new state pension wouldn’t pay tax on it. It’s a controversial pledge criticised for being intergenerationally unfair and Labour have refused to match it.
