Almost seven million pensioners have an average annual tax bill of £3,522, with the total amount of income tax paid by these individuals reaching £24bn in 2015 to 2016, according to analysis of Royal London.
The pension provider’s data, based on a freedom of information request to HM Revenue & Customs (HMRC) combined with published sources, showed the number of taxpayers aged 65 plus nearly doubled from 3.32 million in 1995 to 1996 to 6.49 million in 2015 to 2016 - the last year for which detailed figures are available.
Royal London’s research showed that the 3.87 million men pay more tax, in average per year, than the 3 million women - £4,341 and £2,467, respectively.
More than a quarter of taxpaying pensioners are still in paid work – 1.5 million have employment income and 0.5 million have income from self-employment.
Pensioners pay income tax if their earnings – including state pension – are above the tax-free allowance – currently £11,850.
Recent research published by the Resolution Foundation Intergenerational Commission suggested that pensioners that are still working should continue to make national insurance contributions, to fund a £2.3bn NHS levy.
From the total amount of tax paid by pensioners in 2015/16, around £21bn came from England, £1.7bn from Scotland, £0.8bn from Wales and £0.4bn from Northern Ireland.
Royal London also broke down the data by local authorities, with Surrey footing the highest total tax bill (£961m), followed by Hampshire (£763m), Essex (£756m), Greater Manchester (£646m) and Kent (£645m).
The ‘top 10’ local authorities for average pensioner income tax bills were:
Local authority | Tax bill of average pensioner |
Kensington & Chelsea | £32,250 |
Westminster | £28,938 |
Camden | £18,692 |
Epping Forest | £14,133 |
South Bucks | £14,111 |
Barnet | £9,606 |
Elmbridge | £9,500 |
Hammersmith and Fulham | £8,462 |
Mole Valley | £8,000 |
Cotswold | £7,769 |
The ‘bottom 10’ local authorities for average tax bills were:
Local authority | Tax bill of average pensioner |
Redcar & Cleveland | £1,737 |
Sunderland | £1,727 |
Coventry | £1,700 |
Blackpool UA | £1,667 |
Sandwell | £1,667 |
East Ayrshire | £1,667 |
Kingston upon Hull UA | £1,444 |
Blaenau Gwent | £1,286 |
Stockton-on-Tees UA | £1,192 |
Stoke-on-Trent UA | £1,192 |
According to Sir Steve Webb, director of policy at Royal London, and former pensions minister, “many people might assume that once you retire you cease to be of interest to the taxman”.
He said: “But these figures show that this is very far from being the truth. The number of taxpaying pensioners has nearly doubled in the last two decades.
“With talk of also requiring pensioners to pay National Insurance on any earnings or even pensions, the older population may start thinking of themselves as ‘Generation still taxed’.
“When planning for retirement it is vital to remember that the tax office will still want a slice of your income, which reinforces the need to put aside enough to secure a decent standard of living, even after the tax man has had his slice.”
maria.espadinha@ft.com
