Some 660,000 pensioners are being forced to pay income tax which experts claim is “no surprise” in light of policies put in place by the Government.
Recent figures published by HM Revenue and Customs (HMRC) found that the number of Britons paying tax on their state pension rose from 7.85million to 8.51million.
Many have cited Chancellor Jeremy Hunt’s decision to freeze tax allowances until 2028 as the reason behind this due to the impact of “fiscal drag”.
This is the term used to describe when tax thresholds remain at the same level at a time when household incomes are rising.
In what is referred to as a “stealth tax”, Britons are being pulled into higher brackets and forced to lose more of their hard-earned cash.
Despite Prime Minister Rishi Sunak accusing the Labour Party of preparing a “retirement tax”, pensioners are among the groups being impacted by this policy.
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State pensions are guaranteed to rise every year under the triple lock which is the metric used to decide the annual payment rate.
Retirement benefits go up by either the consumer price index (CPI) rate of inflation, average earnings or 2.5 per cent; whichever is highest.
Currently, the full, new state pension comes to just over £11,500 a year which is below the personal savings allowance of £12,750.
However, if the triple lock remains in place, payments are expected to exceed this tax-free threshold in the next few years.
Even without the annual state pension crossing this threshold, many older Britons on lower incomes are losing money to HMRC due to having other retirement savings.
Speaking exclusively to GB News, Forbes Dawson partner Tom Minnikin outlined why some older households should prepare to pay more tax in the years ahead.
The tax expert explained: “It comes as no surprise to find that the number of state pensioners paying income tax has risen.
“This has almost certainly come about due to the decision by the Conservative government to freeze income tax thresholds, including the personal allowance.
“From April 6, 2024 an individual on the full state pension is entitled to £11,502. With the personal allowance being £12,570 it would not take a lot of additional income for the individual to start having to pay tax.
“We know that many more pensioners are working into retirement to make ends meet.
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“For wealthier pensioners further up the income scale, the freezing of the basic rate band (the point at which an individual moves into higher rate tax) will also have led to increased taxation.”