Millions of pensioners ‘dragged’ into paying higher tax rates
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Two reasons why millions of pensioners are paying higher income tax rates
- Around one million pensioners in the UK are now paying income tax at the higher rate of 40 per cent or above, double the number from four years ago.
- The total number of pensioners paying any income tax has increased by roughly two million between 2021-22 and 2025-26.
- The freeze on income tax thresholds and increases in state and other inflation-linked pensions are cited as key factors.
- Becoming a higher-rate taxpayer can trigger a "triple whammy" effect: more tax on pensions and savings, a reduced personal savings allowance, and a higher capital gains tax rate.
- This trend is expected to continue due to frozen allowances, though the rate of increase may slow as the state pension age rises.