Over 1million pensioners now paying income tax at 40% as figure DOUBLES in stealth tax raid

OVER one million pensioners are now paying income tax at 40% or over, with the figure doubling in the past five years, new research has found. A Freedom of Information request submitted by Steve Webb, partner at pension consultants LCP revealed a surge in the number of pensioners paying income tax at the highest rates. A Freedom of Information request submitted by Steve Webb, partner at pension consultants LCP revealed a surge in the number of pensioners paying income tax at the highest rates Credit: Alamy Income tax is paid at different rates depending on your income, and some people pay nothing at all. That’s because there’s something known as the personal allowance. This is worth £12,570, and is the amount you can earn before you begin paying tax. Sign up for the Money newsletter Thank you! As it stands, those who earn between £12,571 to £50,270 a year are taxed at the basic rate of 20%. Meanwhile, those who earn between £50,271 to £125,140 are taxed at a higher rate of 40%. Very high earners who make upwards of £125,140 a year are taxed at a rate of 45%. Income tax thresholds have been frozen for over five years, first starting in April 2021. Research from LCP found the number of taxpayers at state pension age paying income tax at 40% or 45% has risen from just under half a million (494,000) in 2021/22 to over a million (1,092,000) in 2026/27. The numbers paying the highest (45%) rate have roughly trebled over that period. Steve Webb, partner at pension consultants LCP said: “Many 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% or more out of their pensions in tax. Most read in Money “But this is the norm now for over a million pensioners, with the number set to rise further. “Those who are planning their retirement finances will increasingly need to allow for the fact that a significant chunk of the income they had planned to live on will be taxed at 40% or more, and for some that means more pension saving will be needed today to compensate”. Comment now