Over One Million UK Pensioners Now Higher Rate Taxpayers Due Frozen Thresholds

New data from HM Revenue and Customs reveals that over one million pensioners in the UK are now paying higher rate income tax of 40% or more, a figure that has doubled in just four years due to frozen income tax thresholds and above-inflation increases in state pension payments. The freeze on tax thresholds, maintained through multiple budgets, combined with rising state pensions under the triple lock, has pushed many pensioners into higher tax brackets, a phenomenon described as fiscal drag. This shift not only increases tax liabilities on state and company pensions but also reduces the personal savings allowance for higher rate taxpayers, leading to a 'triple whammy' of higher taxes on pension income, savings interest, and capital gains. Former pensions minister Sir Steve Webb, who obtained the figures and now works with pension consultants LCP, warns that the number of pensioners facing these higher tax rates is likely to continue rising as thresholds remain frozen until at least 2028. The growing tax burden on pensioners has raised concerns about the financial impact on retirees, especially those relying heavily on state pensions combined with other income sources. While the state pension age is set to rise gradually, this may slow the rate of increase in higher rate taxpayers but will not reverse the current trend.