Jon Greer, Head of Retirement Policy at Quilter, comments on the number of pensioners that will pay more tax by 2028 due to frozen income tax thresholds.

New freedom of information data from HM Revenue and Customs, obtained by Quilter, the financial adviser and wealth manager, reveals that 3.1 million or one in five pensioners will be dragged into paying higher or additional rate tax by the 2027/28 tax year due to the government’s frozen income tax thresholds.

The analysis shows that 2.7 million people aged 60 and over will be brought into the higher rate of income tax in the tax years 2022-23 to 2027-28, while nearly half a million will be brought into the additional rate. More than a third – 1.3 million – are 70 or over.

ONS population estimates show there are 16.8 million people aged 60 and over living in the UK. This means the equivalent of almost an additional one in five are expected to be taxed at the higher or additional rate of tax due to the government’s frozen tax thresholds increasing tax by stealth.

Jon Greer, Head of Retirement Policy at Quilter, says:

The number of pensioners likely to pay higher and additional rates of income tax as a result of frozen thresholds is set to increase exponentially by 2028, and not only will this boost government coffers by stealth, but it looks likely that other tax increases are on the cards. With the Labour government’s first Budget now just over two months away, it is vital that people are managing their finances tax efficiently to help reduce their overall burden.

Those nearing retirement or semi-retired and still working should look to maximise their pension contributions whenever possible. Pension contributions can sometimes help you avoid tipping over into a higher income tax bracket. They are especially beneficial for higher rate taxpayers, as you can currently receive up to 40% tax relief on your contribution but will often only pay the basic rate of 20% when you withdraw the money in the future.

Full press release: Frozen thresholds will see one in five pensioners dragged into paying higher or additional rate tax by 2028

✉️ Tim Skelton-Smith, Quilter, 07824 145076