1 in 5 pensioners face higher rate tax bill

Wealth manager Quilter has warned that 3.1m pensioners face paying higher rate or additional rate tax by 2027/28 due to fiscal drag, according to a Freedom of Information (FOI) data request. The firm says that its FOI data predicts that 3.1m pensioners (one in five) face being dragged into paying higher or additional rate tax due to the government’s frozen income tax thresholds. Income tax thresholds were frozen in the March 2021 Budget until 2026 but this freeze was later extended to 2028. Quilters bases its warning on new Freedom of Information data from HMRC. Quilter’s analysis found that 2.7m people aged 60 and over will be pushed into the higher rate of income tax in the tax years from 2022-23 to 2027-28 and nearly half a million will be brought into the additional rate. More than a third being hit by higher rate tax, 1.3m, are 70 or over. ONS population estimates suggest there are 16.8m people aged 60 and over living in the UK. Quilter says this means the equivalent of almost an additional one in five are expected to be taxed at the higher or additional rate of tax due to the government’s frozen tax thresholds increasing tax by “stealth.” Additionally, not everyone aged 60 and over will be paying income tax, the wealth manager says. Therefore, the proportion of those who do pay income tax and are pulled into the higher and additional rates is likely to be even greater. Quilter says that with the Chancellor confirming that tax increases are likely in her October Budget and Labour promising not to change income tax rates, a decrease in tax is unlikely. This implies, more people will end up paying higher tax rates, Quilter said. Jon Greer, head of retirement policy at Quilter, said many more pensioners will be faced with paying higher rate tax and should consider getting advice. He said: “The number of pensioners likely to pay higher and additional rates of income tax as a result of frozen thresholds is set to increase exponentially by 2028, and not only will this boost government coffers by stealth, but it looks likely that other tax increases are on the cards. “With the Labour government’s first Budget now just over two months away, it is vital that people are managing their finances tax efficiently to help reduce their overall burden.

1 in 5 pensioners face higher rate tax bill

Related items

News from Twitter