Some 8.5 million people aged 65 and over are income tax payers – an increase of around 10% compared with a year earlier – according to HM Revenue & Customs (HMRC) figures.
In 2022/23, just over 7.7 million people aged 65 and over were income tax payers.
In 2004/05, just under 4.3 million people aged 65 and over were income tax payers.
The total number of taxpayers of all ages increased by 1.3 million annually to reach 35.9 million in 2023/24.
The number of pensioners paying tax will continue to increase rapidly in years to come, particularly if inflation remains relatively high and thresholds continue to be frozen— Sir Steve Webb, LCP
Sir Steve Webb, a former Liberal Democrat pensions minister who is now a partner at consultants LCP (Lane Clark & Peacock), suggested the significant increase in the number of older people paying tax will have been driven by the bumper (10.1%) increase in the state pension in April 2023, as well as inflation-linked increases to other pensions.
He said: “A combination of high inflation and frozen tax allowances means that well over eight million people aged 65 or over are now paying tax, a doubling in the last two decades.
“The number of pensioners paying tax will continue to increase rapidly in years to come, particularly if inflation remains relatively high and thresholds continue to be frozen.”
Under the pensions “triple lock”, the state pension normally rises each year in line with wages, inflation or 2.5% – whichever is higher.
It has been suggested that stubbornly high inflation may pave the way for older people receiving another bumper state pension increase next year.
Alice Guy, head of pensions and savings at interactive investor, said: “The stark figures demonstrate the chilling effectiveness of freezing tax thresholds.”
