New figures published this morning by HMRC show a surge in the number of pensioners paying tax as well as a big growth in the number of people of all ages paying tax at the highest rates.
The annual income tax statistics show:
– In 2023/24 the number of over 65s paying income tax stood at 8.5m, an increase of around 10% on the 2022/23 figure of 7.73m; the figure of 8.5m is exactly double the number of taxpaying over 65s in 2004/05;
– The total number of taxpayers of all ages rose by 1.3 million to 35.9 million; slightly more women (0.7m) than men (0.5m) were dragged into the tax net; (note that subtotals do not sum exactly because of rounding in the published figures);
– More people are paying tax at higher rates; the numbers paying the top (45%) ‘additional’ rate soared from 555,000 to 862,000, whilst the numbers paying at the higher (40%) rate rose from 5.28m to 5.59m;
The large rise in the number of older people paying tax will have been driven by the relatively large (10.1%) increase in the state pension in April 2023, as well as inflation-linked increases to other pensions, at a time when the starting point for tax was once again frozen.
Commenting, Steve Webb, partner at LCP said:“The surge in the number of pensioners paying income tax shows that the policy of freezing tax thresholds is really beginning to bite. 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 number of pensioners paying tax will continue to increase rapidly in years to come, particularly if inflation remains relatively high and thresholds continue to be frozen. The freezes also mean far more people now paying a top tax rate of 45% which was previously intended only for the very richest”