HMRC has released updated projections indicating that approximately 10.2 million people aged 65 and over will be paying income tax in the 2026-27 financial year. This marks a significant increase from 9.57 million in 2025-26, driven by frozen tax thresholds and demographic shifts.
Nearly a Quarter of Taxpayers Over State Pension Age
By the end of the current tax year, almost a quarter of all taxpayers are expected to be over the state pension age. In 2025-26, 9.08 million individuals above state pension age were income tax payers, projected to rise to 9.58 million in 2026-27. The state pension age is gradually increasing from 66 to 67.
Sir Steve Webb, former pensions minister and partner at LCP, commented: "The surge in older people paying income tax is continuing."
Impact of Frozen Tax Thresholds
The number of higher-rate income tax payers is also rising sharply. HMRC projects 7.7 million higher-rate taxpayers in 2026-27, up from 6.6 million in 2024-25 — an increase of over one million. Overall, the total number of income tax payers in 2026-27 is estimated at 40.8 million.
Laura Suter, director of personal finance at AJ Bell, noted: "Frozen tax thresholds are affecting almost everyone who pays income tax, from pensioners to anyone earning more than the £12,570 personal allowance." She added that an ageing population and more people working beyond state pension age are contributing to the trend.
Broader Implications for Pensioners
David Brooks, head of policy at Broadstone, emphasised that pensioners are not a uniform group: "While some rely heavily on the state pension, many benefit from occupational and private pension savings built up over decades."
Shaun Moore, tax and financial planning expert at Quilter, said: "What were once considered tax rates for wealthier people are increasingly reaching a much broader group." He explained that while wages have grown, much of the increase reflects inflation, meaning people pay more tax not because they are wealthier but because frozen thresholds capture more of their income.
