Pensioners are being forced to pay up to £2,000 on their State Pensions under Labour. Some 320,000 retirees had to pay whopping tax bills of at least £1,000 in the last financial year on their State Pensions, an increase of 71,000 compared to 2024-25.
However, the number of pensioners who had to pay a least £2,000 in tax almost doubled in that time period, up 48% to 15,800 people. Critics pointed out that retirees are now having to increasingly pax tax on income that was designed for security, rather than discretionary spending.
The State Pension is worth £11,973 annually, which sits just below the UK tax-free personal allowance of £12,570, but Britain’s pension system means some retirees have been pushed over this bracket.
The analysis of the Department of Work and Pensions data, conducted by the Telegraph, showed that pensioners aged 80 and over were the most likely to suffer from this. This is primarily because they could add top-ups to the pre-2016 state pension, known as Serps.
Adam Cole, of wealth manager Quilter, warned pensioners pay higher taxes without “any meaningful improvement in their living standards”.
He added: “For many pensioners, there is a growing disconnect between policy intent and lived experience. Income is rising largely because of government uprating decisions, yet tax allowances have failed to keep pace with inflation.
“The result is that pensioners are increasingly taxed on income designed to provide security, not discretionary spending.”
In April, the full State Pension will rise to £12,547 per year in April, just £23 away from the allowance, so the number of impacted retirees could be even higher.
This number is expected to rise further in the coming years if the triple lock promise is kept, because while pensions increase, Rachel Reeves announced that the tax-free allowance will be frozen for another three years until 2031.
The majority of State Pensioners will also have a pension linked to their workplace, which would push their earnings over the tax-free limit, so they will likely pay tax on this income.
