Meanwhile, data out today shows that the rate of consumer price inflation fell to 1.7pc in September – the lowest reading since 2021.
Wage growth will therefore almost certainly be used to uprate the state pension next year instead of inflation, although this will be confirmed in the autumn Budget.
As a result the new state pension is on track to increase by £473 next April, reaching £11,975 a year. It means pensioners with even modest additional revenues of income will be dragged into paying income tax.
Pensioners consultants LCP estimate that this amounts to 350,000 pensioners who will pay an extra £16m collectively as a result.
Former pensions minister Sir Steve Web, now of LCP, said: “Thousands of pensioners currently have incomes just below the tax-free threshold, so even small additional increases can bring more of them into the tax net.
“This does not necessarily mean that they will have to fill in a tax return but it does mean that HMRC will try to collect tax either by deduction from any private pension income or through an end-of-year tax demand.”
Dean Butler, of pensions company Standard Life, said: “The personal allowance, which is the amount of income you can receive before paying tax, has been frozen at £12,570 since 2021-2022 and currently remains fixed for quite a few years to come.
“This means that the full new state pension payment has grown from 70pc of the allowance in 2019-20 to a likely 95pc next year, leaving pensioners with only £594.40 of headroom before they begin paying income tax.”
Millions are paying more tax as their earnings rise while tax bands remain frozen.