UK pensioners paying higher income tax rates more than double

More than one million pensioners in the UK are now paying income tax at the 40% higher rate or the 45% additional rate. Official figures obtained via a Freedom of Information request show that the number of pensioners liable for the 40% rate has more than doubled in five years, rising to approximately 1.09 million from 494,000 in 2021/22.

The number of pensioners paying the 45% additional rate has roughly trebled during the same period. This trend is attributed to frozen tax thresholds—including the £12,570 personal allowance and the £50,270 higher-rate threshold—combined with inflation-linked increases to state pensions and other retirement incomes.

Steve Webb, a former pensions minister and partner at LCP, noted that the freeze on allowances and thresholds is set to continue until 2030 or 2031. Webb warned that these developments may force individuals planning for retirement to increase their savings to compensate for the higher tax burden on their future income.