UK pensioners average £3,500 income tax a year, FOI request reveals

Britain’s almost seven million taxpaying pensioners foot an average tax bill of £3,500 a year, analysis of a reply to a freedom of information (FOI) request by Royal London has revealed.

The insurer used the Freedom of Information Act to obtain a detailed breakdown of pensioner taxpayers across the UK, with the data covering every local authority in the UK. The data relates to the 6.87m taxpayers over state pension age in 2015/16 – the latest year for which detailed figures are available – and includes around 400,000 women over state pension age but under the age of 65. It showed:

* Among those 6.87m taxpaying pensioners, the average annual tax bill was £3,522. For the 3.87 million men, the average bill was £4,341 while, for the three million women, the average was £2,467;

* More than a quarter of taxpaying pensioners are still in paid work – 1.5 million have employment income and 500,000 have income from self-employment; and

* The total amount of income tax paid by pensioners in 2015/16 was around £24bn. Of this, around £21bn came from England, £1.7bn from Scotland, £0.8bn from Wales and £0.4bn from Northern Ireland.

“Figures obtained under the Freedom of Information Act by Royal London show the large and growing tax bills faced by pensioners in different parts of the UK,” said Royal London director of policy Steve Webb.

“Analysis of the FOI reply combined with published sources shows the number of taxpayers over the age of 65 nearly doubled from 3.32 million in 1995/96 to 6.49 million in 2015/16.” He added that, as the following graph shows, it is estimated the number has broadly stabilised since then and stands at around 6.37 million in 2018/19.

‘Generation still taxed’

“Many people might assume that, once you retire, you cease to be of interest to the taxman,” Webb continued. “But these figures show 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 the tax office will still want a slice of people’s 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.”

‘Top 10′ local authorities for average pensioner income tax bills

Source: UK Government/Royal London

‘Bottom 10′ local authorities for average pensioner income tax bills

Source: UK Government/Royal London