More than 12 million pensioners might end up paying income tax on their retirement by the end of the decade, thanks to bumper increases in the State Pension and frozen personal tax allowances
Millions of older Brits are likely to start paying income tax over the next five years, with large increases in State Pension payments pushing more and more pensioners over their personal tax threshold. This is because more than 12 million people over the age of 66 could see their State Pension rise by over £1,000, thanks to the Labour Government's commitment to the Triple Lock.
Out of the 12.7 million individuals receiving the State Pension, approximately 8.1 million are currently paying tax in retirement. This is primarily due to supplementary income from workplace or private pensions on top of their State Pension, reports the Daily Record. The full New State Pension is valued at £221.20 per week. Given that payments are typically made every four weeks, this equates to £884.80 each pay period.
An individual on the full rate of the Basic State Pension will receive £169.50 each week, amounting to £678 each pay period. Over the 2024/25 financial year, this represents an increase of £692, taking the annual income from £8,122 to £8,814. “This is especially tough for those mainly living off the State Pension. With no change in the tax thresholds, they could find themselves owing more tax than they expected, making things hard if they don’t have much to begin with.”
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