Pension alert: Over 65s paying 'record amount of income tax' as millions losing retirement income

Older man and HMRC letter

Pensioners are paying a "record" amount of tax, according to Labour

Patrick O'Donnell

By Patrick O'Donnell

Published: 06/06/2024

- 15:06

The Government's record when it comes to pensioners and taxes is coming under fire ahead of the upcoming General Election

Millions of over 65s across the UK are paying a "record amount of income tax" in a blow to pensioners, according to the Labour Party.

Shadow Pensions minister Liz Kendall is taking aim at the Conservative Party's record in Government when it comes to pensions and taxes with more people being hit by a "stealth tax".

Labour is citing that the number of over 65s paying income tax has almost doubled since the Tories came to power, from 4.5 million in 2009/10 to 8.5 million in 2023/24.

Kendall has claimed Prime Minister Rishi Sunak's party has overseen a worsening standard of living for those in retirement.

She said: "Rishi Sunak was recently asked why he hates pensioners.

"It's not hard to see why when they have so profoundly failed pensioners, from increasing levels of pensioner poverty to breaking their promise on the triple lock, Rishi Sunak and the Tories have worsened the quality of retirement."

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Liz Kendall

Labour's Shadow Chancellor Liz Kendall is hitting the Tories on their record in Government


"Now the Tories pose a new threat to pensioners' living standards, with reckless unfunded spending commitments and a £46billion tax black hole that threatens the economy and the future of the state pension.

"Combined with this is the fact that under their watch a record amount of over 65s are paying income tax.

"My message to pensioners at this general election is simple - look at your wallet, look at the quality of your healthcare and look at the lack of housing for your children and grandchildren and ask yourself, is this as good as it gets?"

Last September, Government figures revealed that in the year ending March 2022, pensioners paid £19.5billion in income tax on payments from their private pensions.

Experts have cited the impact of fiscal drag as to why more and more older people are seeing their retirement income lost to HM Revenue and Customs (HMRC).

This occurs when incomes rise at a time when tax allowances are frozen, which results in taxpayers being dragged into higher brackets.

Chancellor Jeremy Hunt has previously promised to keep tax thresholds until at least 2028.

At the same time, the Government has pledged to keep the state pension triple lock in place which ensures payments will rise every year.

Under the triple lock, retirement benefits will rise either in line with inflation, average earnings or 2.5 per cent.

Experts have previously warned the tax allowance freeze could see Britons pay tax on their state pension alone in a couple of years.


Pensioners look worried at their financesThe number of pensioners paying tax on their income has risen GETTY

However, Sunak's Government has promised to introduce the "triple lock plus" to avoid this fate.

The Tories are suggesting the tax-free allowance for pensions will be raised annually in line with the triple lock.

If this were implemented, state pensions would essentially be protected from paying tax.

As it stands, the personal savings allowance comes to £12,750 while the full new state pension exceeds £11,000 a year.

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