We're all feeling the pinch yet pensioners are suffering more than most, as new figures reveal retirees are hit with an average tax bill of £100 a week.
The average OAP household now hands over £5,000 a year to the taxman. So just where is it going?
The combined annual tax bill for UK pensioners is around £34billion, according to the research by insurers Met Life.
The largest chunk is income tax, added to by a string of other duties including VAT, currently charged at 20%, petrol duty, vehicle excise duty and the TV licence, which only becomes free at the age of 75.
The study says a typical pensioner household has a gross income of £18,834 a year, with £5,124 then taken by the taxman. This means that 27% of their income – around £1 in every £4 – is paid out in tax.
Dominic Grinstead, managing director of MetLife Europe, said: "Tax does not end when you stop working. The fact that 27% of their gross retirement income is being swallowed up by tax is a major factor to consider when planning for retirement."
The Met Life report, which is based on figures from the Office for National Statistics, shows that poorer pensioners pay a higher percentage of their income in tax than their wealthier peers. Those with an income of £9,445 a year pay out £3,175 a year – a 33% hit compared with the 27% average.
Figures from HM Revenue and Customs show the number of tax-paying pensioners is at record levels.Of Britain's 25million taxpayers, 4million are aged 65 and above – a million more than a decade ago.