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4w ago

Frozen tax thresholds push over 1 million UK pensioners into higher income tax rates

Stagnant personal allowance levels combined with annual state pension increases are creating unexpected liabilities for retirees

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Overview

  • More than 1 million pensioners now pay the higher 40% income tax rate after Triple Lock pension boosts lifted them above the frozen personal allowance.
  • The personal allowance has been fixed since 2021 and will remain unchanged until 2028, forcing around 8.8 million pensioners to pay some level of income tax.
  • Had the allowance tracked inflation it would be about £15,500, meaning retirees are currently taxed on roughly an extra £3,000 of income.
  • HMRC issued 1.32 million “simple assessments” to pensioners in 2023/24, a 74% increase that highlights growing administrative challenges.
  • Combined income tax and National Insurance deductions can reach nearly 28% of pension earnings, prompting experts to call for threshold adjustments to ease financial strain.