Warnings more pensioners will lose cash to tax
09:10, 05 Sep 2025Updated 09:41, 05 Sep 2025
More pensioners are being dragged into income tax.
Millions of pensioners are finding themselves having to pay income tax because of “unfair” rules.
And there are warnings more seniors face being dragged into paying tax.
This is happening due to frozen personal allowance thresholds, the amount when someone starts paying income tax.
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More pensioners are being pushed past this £12,570 limit because the state pension rises every year under the terms of the triple lock policy.
The Government has faced calls to raise the personal allowance limit to protect more retirees from being stung by HMRC but has refused to do so.
The personal allowance is due to stay frozen until 2028, as pensions continue to rise.
The full state pension rate could surpass the £12,570 next year, experts say.
Derence Lee, chief finance officer at Shepherds friendly, warned: “Due to the extremely high levels of inflation the UK has experienced since 2020, state pensions have been increasing at a rate that some experts believe to be unsustainable in the long term.
“With pensions expected to surpass the frozen tax-free allowance limit next year, which will remain unchanged by the Government until 2028, more retirees will be pushed into the tax-paying bracket.
“As a result, pensioners should begin to take into account that they may soon need to pay income tax on their pensions should no changes be made to current status-quo.
”Whilst the triple lock has been helpful in ensuring retirees’ incomes keep up with the cost of living, taxing pensioners could have significant financial implications, particularly for those who rely heavily on their pensions to cover essential living costs and make ends meet.”
He added: “For those looking to retire in the near future, they should consider how their income can be built up by saving into a tax-free ISA, growing their savings through investments where possible, and utilising workplace pension schemes to secure their future income during retirement.”