New HMRC figures have revealed that nearly three million more pensioners have been dragged into income tax liability since the income tax thresholds were frozen in 2021. As a result, nearly a quarter of all taxpayers are now over the state pension age, according to The Telegraph.
Record Numbers of Taxpaying Pensioners
Figures show that 9.5 million pensioners are to be hit with tax bills this year. HMRC's data indicates that 9.58 million pensioners are expected to pay tax in the 2026-2027 tax year, an extra 500,000 compared to the previous tax year and 2.84 million more than in the 2021-2022 tax year when the thresholds were first frozen.
Millions more are expected to join this group of unexpected taxpayers next year as the full new state pension will overtake the personal allowance limit. The full new state pension, currently worth £12,547.60 per year, is guaranteed to cross the personal allowance limit of £12,570 next April due to the annual triple lock increase. Once past this limit, pensioners could face 20% income tax on their total income up to £50,270.
Income Sources Subject to Tax
This total income includes: money you earn from employment; profits if you're self-employed, including from services sold through websites or apps; some state benefits; most pensions, including state pensions, company and personal pensions and retirement annuities; rental income (unless you're a live-in landlord earning less than the Rent a Room Scheme limit); benefits from your job; income from a trust; and interest on savings over your savings allowance.
Rachel Reeves has extended the freeze on these thresholds until April 2031, meaning that with each annual rise from the triple lock, more and more pensioners could be dragged into tax bills. Analysis by LCP found more than seven in 10 pensioners now pay tax.
Expert Comment on the Surge
Sir Steve Webb, a former pensions minister now at LCP, told The Telegraph: “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.”
Although the full new state pension is edging closer to the personal allowance, DWP data from 2024, analysed by Royal London, showed just over half of people receiving the new state pension got the full amount. The rest received only a portion equivalent to their National Insurance record. To claim the full new state pension, you need a minimum of 35 qualifying years. A qualifying year counts as a full year you paid National Insurance or received National Insurance credits. If you have between 10 and 35 years, you can still get part of the new state pension, but with less than 10 years you won't receive any.
