{"id":125133,"date":"2026-09-04T13:15:00","date_gmt":"2026-09-04T12:15:00","guid":{"rendered":"https:\/\/en.econostrum.info\/uk\/?p=125133"},"modified":"2026-09-04T12:57:10","modified_gmt":"2026-09-04T11:57:10","slug":"over-1m-pensioners-face-40-or-45-income-tax","status":"publish","type":"post","link":"https:\/\/en.econostrum.info\/uk\/over-1m-pensioners-face-40-or-45-income-tax\/","title":{"rendered":"Over 1M Pensioners Now Face 40% or 45% Income Tax as the Stealth Tax Squeeze Deepens"},"content":{"rendered":"\n

The figures highlight how the tax position of retired people has changed since 2021. According to data obtained from HM Revenue and Customs through a Freedom of Information request by former pensions minister Sir Steve Webb<\/strong>, 1.092 million people above state pension age are paying higher-rate or additional-rate income tax in 2026\/27, compared with just under 494,000 in 2021\/22.<\/p>\n\n\n\n

Frozen Thresholds Are Drawing More Pensioners Into Higher Tax Bands<\/strong><\/h2>\n\n\n\n

The number of pensioners liable for the 40% higher rate has doubled to 977,000 over the past five years, while the number paying the 45% additional rate has risen to 115,000. At the same time, the number paying the 20% basic rate<\/strong> has increased substantially. According to figures reported by This is Money, 8.48 million pensioners are now paying basic-rate income tax, up by roughly a third over the same period.<\/p>\n\n\n\n

The changes have taken place while key income tax thresholds have remained unchanged. The personal allowance has been frozen at \u00a312,570, while the threshold at which the 40% rate begins has remained at \u00a350,270. The threshold for the 45% additional rate was initially frozen at \u00a3150,000 before being reduced to \u00a3125,140 from the 2023\/24 tax year.<\/p>\n\n\n\n

Pension incomes, meanwhile, have increased. State pension payments<\/strong> have risen under the triple lock, which increases payments each year by the highest of inflation, earnings growth or 2.5%. Other pension incomes have also risen alongside inflation.<\/p>\n\n\n\n

Sir Steve Webb<\/a> said the combination of higher pension incomes and static tax thresholds had changed the assumptions many people might have made about their finances in retirement. \u201cMany people of working age may have expected that they would be basic rate taxpayers in retirement, but few will have expected to find themselves paying 40 per cent or more out of their pensions in tax<\/em>,\u201d he said.<\/p>\n\n\n\n

\"\"
Frozen income tax thresholds push 977,000 pensioners into 40% rate \u00a9 Shutterstock<\/em><\/figcaption><\/figure>\n\n\n\n

Retirement Income Targets Do Not Include the Effect of Income Tax<\/strong><\/h2>\n\n\n\n

The figures also affect the way future retirees may need to consider their expected income. Sir Steve said people planning their retirement <\/a>finances<\/strong> would increasingly have to allow for part of their pension income being taxed at 40% or more.<\/p>\n\n\n\n

Industry benchmarks illustrate the amounts retirees may aim to receive. According to Pensions UK figures cited by This is Money, a single person requires an annual income of \u00a332,700 for a \u201cmoderate\u201d retirement, while a couple needs \u00a345,400.<\/p>\n\n\n\n

For what the organisation describes as a more affluent retirement, the suggested figures rise to \u00a345,400 for a single person and \u00a362,700 for a couple. A more limited retirement is estimated at \u00a313,900 for one person and \u00a322,500 for a couple.<\/p>\n\n\n\n

Those figures assume entitlement to the full state pension<\/strong> but do not include income tax, mortgage or rent payments, or care costs in later life. The full new state pension currently stands at \u00a3241.30 a week, or almost \u00a312,550 a year. That leaves it close to the frozen \u00a312,570 personal allowance.<\/p>\n\n\n\n

Webb said higher taxation could mean some people need to save more before retirement to compensate for the proportion of their planned income that may ultimately be taxed at higher rates.<\/p>\n","protected":false},"excerpt":{"rendered":"

More than one million pensioners are now paying income tax at the 40% or 45% rates, more than double the number recorded five years ago. The increase has come as tax thresholds have remained frozen while state and private pension incomes have risen.<\/p>\n","protected":false},"author":10,"featured_media":125136,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[29],"tags":[],"class_list":["post-125133","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-taxation","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33","no-featured-image-padding"],"_links":{"self":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/125133","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/comments?post=125133"}],"version-history":[{"count":2,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/125133\/revisions"}],"predecessor-version":[{"id":125137,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/125133\/revisions\/125137"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/media\/125136"}],"wp:attachment":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/media?parent=125133"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/categories?post=125133"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/tags?post=125133"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}