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1.6 Million Pensioners to Pay Tax Over Next Four Years

Retirement written on a blackboard behind three piggybanks on books
Author: Samuel Beckingham
Updated: Apr 17, 2024
3 minutes read

An analysis into the tax plans from the last Budget has revealed that as the state pension increased, so too did the number of pensioners paying tax. Last Monday, the new state pension increased by £902.20 a year due to the government’s commitment to the triple lock pledge. However, thanks to personal allowance freezes, most of this will be cancelled out in a few years.

A Stealth Tax On Pensioners

The Liberal Democrats commissioned research into the House of Commons Library to uncover how pensioners would be affected after the announcements in the Spring Budget. As a result, more than 1.6 million pensioners will be forced to pay income tax over the next four years.

Last week, 600,000 retirees were dragged into their personal allowance threshold. This is the point at which you start paying tax. It’s been frozen at £12,570 since 2021 and will remain in place until at least 2028. According to the findings, as many as 9.3 million people over the age of 66 will be paying income tax by that time.

New State Pension

The full new state pension is now £11,502.40 a year. It’s paid to anyone who reached pension age after 2016. However, thanks to the ‘stealth tax trap’, thousands more pensioners have been pushed to the upper limit of their personal allowance. This means that they will only be able to receive an additional £1,067,60 income before having to pay tax.

If the thresholds hadn’t been frozen, the Office for Budget Responsibility (OBR) estimated that the personal allowance would have increased to £15,220 if it had gone up in line with inflation. By 2028, this could then have been £15,990.

More Pensioners Paying Income Tax

The Institute for Fiscal Studies has discovered some unsettling news. Since 2010, the number of pensioners paying income tax has nearly doubled. It’s gone from 4.9 million to 8.5 million today.

It’s estimated that a taxpaying pensioner will be around £1,000 worse off by 2027/2028. According to the Resolution Foundation, this will cost a massive £8 billion. The freeze on income tax thresholds will negatively impact pensioners much more than the increase announced last week.

Beat the Tax Hikes

The decrease in pay for pensioners is not good news, but there are ways to get back money you might be owed.

Marriage Tax Allowance and Married Couple’s Allowance

Depending on when you or your partner were born, you could qualify for a tax allowance through marriage. The good news is that pensioners can still apply.

Anyone born before 6th April 1935 can receive between £401 and £1,037.50 a year off their tax bill by applying for Married Couple’s Allowance.

Anyone born after 6th April 1935 can apply for Marriage Tax Allowance, giving you up to £252 a year off your tax bill.

Start your claim by clicking on the button below.

Mis-sold PCP

Did you own a car or van through personal contract purchase (PCP) or hire purchase (HP)? Deals before 2021 are being looked into in relation to undisclosed commissions by the regulator. Following their decision in September this year, you could be due money back.

Alternatively, there are other avenues you can make a mis-sold PCP claim for, such as if there wasn’t enough information provided at the time or you were misled in some way. Depending on the length of your agreement or number of cars, you could be owed a few thousand pounds.

To start your claim, click on the button below.

Flight Delay

How many flights have you been on in the last six years? How many of those flights were delayed? While it may have been inconvenient at the time, you can now make money off it.

The maximum amount you can receive for a delayed flight is £520. This is also per passenger, so a number of flights across six years can add up significantly. Read more about how to claim flight compensation by reading our accompanying article.

To find out if you’re eligible, locate your flights by clicking on the button below.