Numbers of pensioners paying earnings tax soars as thresholds freeze ‘bites’

The variety of pensioners paying earnings tax jumped by a tenth in a yr, new figures reveal.

The statistics launched by HMRC present the variety of over-65s paying earnings tax stood at 8.5 million in 2023/24.

The complete is up round 10 % from 7.73 million the yr earlier than.

It is precisely double the variety of over-65s paying earnings tax in 2004/05.

Former pensions minister Sir Steve Webb mentioned extra older individuals have been dragged into paying earnings tax by a freeze within the tax-free private allowance.

Sir Steve mentioned the rise was additionally pushed by the ten.1 % state pension hike in April as a part of the triple lock – which sees funds uprated by the very best out of two.5 %, wages and inflation.

The associate at LCP mentioned: “The surge within the variety of pensioners paying earnings tax exhibits that the coverage of freezing tax thresholds is basically starting to chunk.

“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 variety of pensioners paying tax will proceed to extend quickly in years to return, significantly if inflation stays comparatively excessive and thresholds proceed to be frozen.”

The total number of people of all ages paying income tax rose by 1.3 million to 35.9 million.

Meanwhile, the amount paying the additional rate for those earning over £125,140 jumped from 555,000 to 862,000.

Sir Steve said: “The freezes additionally imply way more individuals now paying a high tax fee of 45 % which was beforehand meant just for the very richest.”