Figures published by HMRC show that the numbers of retirees paying tax have reached record levels of more than ten million.
The number of over 65s paying tax has risen by more than 3 million in the five years since the tax threshold was frozen.
A combination of a frozen tax-free allowance and significant year-on-year rises in the state pension (and other sources of taxable income), alongside a rise in the size of the pensioner population, means that the number of taxpaying over 65s has risen dramatically in recent years.
In April 2027, for the first time, the standard rate of the new state pension will exceed the tax-free threshold, meaning that those wholly dependent on the new state pension would become taxpayers. In the 2025 Autumn Budget, Chancellor Rachel Reeves announced that a scheme would be put in place to prevent such people having to pay tax.
Steve Webb, former pensions minister and now a partner at consultancy Lane Clark & Peacock, says: “The surge in older people paying income tax is continuing, with record numbers of taxpaying pensioners in 2026/27. The recent extension of the freeze in personal allowances, combined with the continued generous indexation of the state pension means that even more people in retirement can expect to become taxpayers for the first time in the coming years.”
Last month, pension bodies urged HMRC to make changes to the way it is planning to collect inheritance tax on unspent DC pension funds, warning current proposals risk creating delays and confusion for grieving families.
