Pru finds pensioners pay 11% of UK’s income tax bill

Pru finds pensioners pay 11% of UK’s income tax bill

Over-65s pay 11 per cent of the UK’s income tax, with an average bill of £3,258, Prudential calculated.

Prudential’s analysis of ONS income and tax data for 2012 to 2013 found that pensioners in the UK pay a total of more than £17.5bn in income tax every year.

The insurer’s analysis of the most recently available ONS data on income and tax shows that in the 2012 to 2013 tax year, over-65s paid 11 per cent of the £157bn total income tax paid for the tax year.

Article continues after advert

The figures do however confirm that the amount of tax you pay falls after turning 65 – the average tax bill for over-65s in the UK is £2,300 less than that for under-65s. The news is not so good for over-65s in London where the difference is only £692 a year.

The Prudential analysis also showed that the distribution of income tax paid by over-65s across the country is skewed heavily towards London.

In the capital, the average amount of income tax paid by over-65s was £8,386 – more than £5,000 higher than the UK pensioner average of £3,258.

Stan Russell, retirement income expert at Prudential, said: “These figures show that just because someone has retired from work doesn’t mean they have retired from paying tax, so taking into account the impact on retirement income is an important part of planning for a comfortable retirement.

“The implication from this analysis is that over-65s in London have either managed to secure themselves more comfortable retirement incomes or perhaps have been able to defer retirement and stay in well-paid employment for longer.

“However, for most of us, saving as much as possible as early as possible in our working lives remains the best way to help secure a comfortable retirement.”

The figures may see a shake up when the impact of the recent changes to pension rules begins to be reflected in annual income tax statistics.

Following the Autumn Statement last December, the Treasury estimated the new rules would generate £380m in additional revenue during the 2015 to 2016 tax year, increasing to £1.25bn by 2018 to 2019.