Retirement Is Just As Taxing For Many As Working

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Pensioners expecting to enjoy a low-tax lifestyle are shocked to find that they are paying £24 billion a year in income tax.

Most pensioners consider they have too low an income to pay tax, but official figures suggest this is not true.

It’s not so bad if you live in Scotland or Wales – pensioners in these countries only pay £3 billion between them.

But the remaining £21 billion comes from millions of pensioners across England.

The figures are official. The come from HM Revenue & Customs (HMRC) in response to a freedom of information request from financial firm Royal London.

Where pensioners pay the most tax

The most tax is paid by pensioners in Surrey, who fork out £961 million a year, which is more than the entire bill for Wales.

Retirees in the posh London suburb of Kensington & Chelsea paid an average £32,250 each in income tax in 2015-16, which was the most recent year for which figures are available.

That’s 27 times more than pensioners pay in Stoke-on-Trent, Staffordshire, where the average bill is £1,192 and the lowest for any local authority in the country.

The number of over 65-year-olds paying tax was 6.49 million, which is twice the number 20 years earlier, in 1995.

A third of over 65s are still working, says HMRC, with 1.5 million employed and 500,000 working for themselves.

Don’t forget to plan for tax

Steve Webb, director of policy at Royal London said: “Many people might assume that once you retire you cease to be of interest to the taxman. But these figures show that 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 that the tax office will still want a slice of your 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.”

The figures do not include capital gains tax on the sale of investments or property.

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