Retirees see income tax rise 13% in five years

Retirees see income tax rise 13% in five years

Retirees have seen their income tax bills increase by 13 per cent in the five years to 2016/17, according to new figures from Quilter.

The wealth management company analysed HM Revenue & Customs data and found people of pension age contributed £4.7bn more in income tax in 2016/17 than in 2011/12, at £22.7bn up from £18bn.

The data also showed that the typical taxpayer over the state pension age now pays £3,400 per year in income tax, up from £3,000 in 2011/12.

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The increases are the result of the overall growth in the retired population - there are now more than 6.6m taxpayers of pensionable age - but also rising average income levels, Quilter stated.

FTAdviser reported in April that the House of Lords is calling on workers receiving the state pension to pay national insurance.

The House of Lords committee on intergenerational fairness argued the reality of longer working lives should prompt the government to rethink the national insurance system.

The committee noted it wasn't fair that only individuals under the state pension age paid this tax and said workers over the age threshold should also contribute.

According to Ian Browne, pensions expert at Quilter, the rise of the retired taxpayer highlights the importance of planning financial affairs as individuals near the end of your working life and enter retirement.

He said: "The ageing of society means we have seen massive growth in the number of income tax payers of pensionable age and the bill each individual is facing is rising fast too."

Mr Browne said the £22.7bn paid by this group was a "huge amount", paid on income from work, self-employment and pensions.

He said: "It shows how crucial they are to the taxman.

"For anyone concerned they might be paying too much tax in retirement, they should speak to a financial adviser. Even someone that feels they have modest pension wealth could potentially benefit from planning their retirement income to be as tax efficient as possible."