The figures show how a growing share of older people is becoming liable for tax without any change to the headline rates. By the end of the tax year, almost one quarter of all income taxpayers are expected to be above State Pension age, reflecting a combination of frozen thresholds, an ageing population and more people remaining in work beyond retirement age.
Frozen Allowances Bring More Pensioners into the Tax System
According to HMRC, around 9.57 million people aged 65 and over paid income tax in 2025-26. That total is expected to rise to 10.2 million in 2026-27, an increase of more than three million since the personal allowance was frozen in the 2021-22 tax year.
The number of taxpayers above State Pension age is also forecast to rise, from 9.08 million in 2025-26 to 9.58 million in 2026-27. The difference between the two measures reflects the fact that the State Pension age is beginning a phased increase from 66 to 67.
Former pensions minister Sir Steve Webb, now a partner at consultancy LCP, said the rise was continuing at pace. “The recent extension of the freeze in personal allowances, combined with the continued generous indexation of the State Pension, means that even more people in retirement can expect to become taxpayers for the first time in the coming years,” he said.
The personal allowance has remained at £12,570 since 2021-22. At the same time, the State Pension has increased under the triple lock, which raises payments each year by the highest of inflation, average earnings growth or 2.5 per cent.
According to figures cited by LCP, around 12.2 million people receive a State Pension. With more than 10 million over-65s now expected to pay income tax, more than seven in 10 pensioners are taxpayers.
Rising Pension Income Is Narrowing the Gap to the Tax Threshold
The full new State Pension is currently worth about £12,550 a year, placing it close to the frozen personal allowance. From April 2027, its standard annual rate is expected to exceed the tax-free threshold for the first time.
The Government has said it intends to introduce a system so that people whose only income is the State Pension will not have to pay tax solely because the payment exceeds the allowance. Details of how that arrangement will operate have not yet been published.
Many pensioners also receive workplace or private pensions, which count as taxable income. David Brooks, head of policy at Broadstone, said older taxpayers were not a single, uniform group, noting that some rely heavily on the State Pension while others have built up occupational and private savings over several decades.
The wider HMRC data shows that 40.8 million people are projected to pay income tax in 2026-27. Of those, 7.7 million are expected to pay the higher rate, compared with 6.6 million in 2024-25.
According to Laura Suter, director of personal finance at AJ Bell, frozen thresholds are affecting pensioners as well as workers earning above the £12,570 allowance. She said population ageing and the number of people working beyond State Pension age were both contributing to the increase in older taxpayers.
