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‘1.2m’ pensioners dragged into paying income tax since Boris Johnson elected in 2019

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Pensioners are being warned that the taxman will take his "chunk" of their increasing state benefit as analysis shows thousands of over 65's will be forced to pay income tax this year.

Some 400,000 pensioners will pay income tax this year because of the government pausing thresholds, according to analysis by the LCP consultancy firm.

Figures released by the firm show that 1.2 million pensioners have been taken above the personal tax-free allowance threshold - which has been frozen for five years - since Boris Johnson won the 2019 general election.

More than 7.7 million of them are now paying tax on their pensions and earnings, LCP says.

It comes just months after the prime minister pledged to reinstate the "triple lock" on pensions next year, coming out of the Covid pandemic.

The triple lock ensures that pensions increases by the highest of inflation, wage growth or 2.5 per cent, with the decision taken in September.

Inflation is currently highest, running at 10 per cent and expected to remain there by September, meaning pensioners are set to see the benefit rise by 10 per cent in April next year.

Sir Steve Webb, the ex-Liberal Democrat pensions minister now a partner at LCP, said the over-65s are going to face a higher tax burden.

“Where pensioners have income apart from the state pension they are likely to be paying a much higher rate of tax today than a decade ago," he told The Daily Telegraph.

"This tax rate will rise still further in coming years because of the freezing of tax allowances until the mid 2020s”.

Last month Downing Street defended its decision to reinstate the triple lock while insisting that public sector workers receiving pay rises in line with inflation would further stoke rising costs.

Asked why state pensions will rise with inflation but not public sector pay, the prime minister’s official spokesperson said: “Pensioners, particularly those who receive state pensions, are disproportionately impacted by high energy costs.

He noted the government took “difficult decisions with regards to the triple lock, a temporary one-year suspension”.

Downing Street also denied its support for those hardest hit by the cost of living crisis will drive up soaring prices.

Asked if the PM is worried that any upcoming tax cuts and increasing national insurance thresholds are still the right way forward, if the government wants to avoid inflationary factors, his spokesperson said: “Generally we think this is not something that will be inflationary. The thresholds, obviously, do provide an uplift to people’s salary but again, it will help those most vulnerable the most.

“The measures we’ve introduced on cost of living, those who benefit most will be those who are hardest hit. So in those instances, we don’t think that helping those most in need during sort of a unique period is something that will drive up inflation.”

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