Every year, more and more pensioners in the UK are being pushed into paying income tax, and the situation is only getting worse. New information from HMRC reveals that by the year 2025/26, about 8.7 million people over the age of 65 will be taxed on their income.
That’s 420,000 more than the previous year, and it’s a huge jump from ten years ago, when just under seven million pensioners were affected. Now, the number is creeping towards nine million.
This increase is largely because income tax thresholds have been frozen since 2021, back when the Conservatives made that decision during a turbulent time in government. Rachel Reeves, the current Chancellor, has decided to keep that freeze going until at least 2028.
There’s even talk that she might extend it beyond that. This freeze is what experts call a “stealth tax” or “fiscal drag.” In simple terms, as people’s incomes slowly go up—like through increases in the state pension—the tax thresholds don’t change. So more people get pulled into paying tax, even if they aren’t actually earning more in real terms.
What makes it worse is that the state pension is going up, thanks to the triple lock system, which raises pensions in line with either inflation, wage growth, or 2.5%, whichever is highest. Right now, the full new state pension is about £11,973 a year.
That’s only around £600 less than the personal tax-free allowance of £12,570. If pensions rise again by more than 5% next year, which is likely, then just the state pension alone will cross the tax line. This means pensioners will start being taxed on the money they get from the government just to live. It’s like giving with one hand and taking with the other.
And the real danger is many older people won’t even realise this is happening. State pensions are paid without tax being taken out first. If a pensioner has just a little extra income like a small private pension, a part-time job, or even savings they could accidentally go over the limit. Then, without warning, HMRC could send them a bill or something called a “simple assessment,” demanding tax payments they weren’t expecting. If they miss the deadline, they can face fines.
This is already affecting a lot of people. In just one year, the number of pensioners receiving simple assessments jumped by 74%, reaching over 1.3 million and that was before the latest figures came out.
While this is happening, the government has also cut back other support for pensioners. Reeves removed the Winter Fuel Payment for wealthier pensioners and made changes to disability benefits. But many of the people now being taxed aren’t wealthy at all. They’re living on modest incomes and struggling with the rising cost of food, energy, and essentials.
The idea that the state pension itself could now be taxed automatically shows just how broken the system has become. Yet Reeves has not made any public moves to fix the problem. Her silence is worrying. It gives the impression that she either doesn’t have a solution or doesn’t plan to act.
This whole situation is becoming a serious problem for older people, especially those who don’t understand the tax system very well or don’t have access to help. Many may get caught off guard, face unexpected tax bills, and suffer stress and sleepless nights over money they thought was secure.
Unless something changes soon, millions of pensioners could be pulled into paying tax they were never meant to face. And the most vulnerable those who worked hard their whole lives will feel it the most.
