More than 100,000 over-65s will pay 45p in the pound on the top chunk of their income in the current 2023-2024 tax year.
The number of pensioners paying the highest rate of tax has nearly doubled in just one year. Over 100,000 taxpayers aged 65 and over will be paying 45p in the pound on the top portion of their income in the current 2023-2024 tax year. This is a significant increase from just 55,000 the previous year, according to data obtained through a Freedom of Information request.
Economists suggest that this six-year freeze equates to an additional tax burden of more than £120 billion across the population over that period. This is due to the failure to adjust the thresholds in line with increases in incomes, resulting in more people paying high tax rates a phenomenon known as fiscal drag. It is estimated that the annual total tax burden will end up around £30 billion a year higher, equivalent to a 4p in the pound rise in income tax.
Simultaneously, the number of individuals paying the 45 percent additional tax rate is anticipated to rise to 101,000, up from 55,000 last year. With nearly a million people paying the highest rate in total, over-65s now makeup approximately one in ten additional-rate taxpayers. "With over a million pensioners expected to pay tax at 40 percent or above in the coming years, the new Government urgently needs to consider whether relying on 'fiscal drag' to push more and more people into higher tax bands is a sustainable strategy."
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