The policy has been labelled unfair as more seniors face HMRC tax bill
Rachel Reeves has been criticised over frozen tax bands.(Image: PA)
Hundreds of thousands more pensioners will find themselves dragged into paying income tax over the next 12 months.
It’s part of rules extended by Chancellor Rachel Reeves which critics claim are unfair.
The issue has been created by frozen tax thresholds, which have been kept in the same place since 2021.
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This is resulting in more over-65s entering new tax bands as the state pension increases every year under the triple lock.
This is known as fiscal drag, as the Government rakes in more tax as people’s incomes increase.
And while people who have the state pension as their sole income will not be taxed, it only takes a modest private pension pot or small amount of interest from savings to take them past the £12,570 personal allowance limit.
An extra 600,000 pensioners will have to pay income tax in 2026/27 and one million by 2030/31, according to latest forecasts.
Chancellor Rachel Reeves has faced criticism over her “stealth tax” policy.
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An Assistance for Seniors spokesperson said: “This is no longer a problem affecting only those with substantial pension pots.
“We are fast approaching a point where simply receiving the full state pension, alongside even a modest amount of savings interest, is enough to trigger a tax bill.”
Derence Lee, chief finance officer at Shepherds Friendly, said: “With the full new state pension rising to £11,973 in April, and personal allowance now frozen at £12,570 until 2031, more retirees are edging dangerously close to paying income tax on their state pension.
“The triple lock has played a vital role in helping pensioners keep pace with the high inflation seen in recent years.
“However, if the tax-free allowance remains frozen, some of the recent state pension increases could effectively be taken back through income tax.”