Pensioners pay £24 billion in income tax, analysis finds

Pensioners paid a £24 billion total income tax bill in 2015-16, analysis from a mutual insurer has found.

Within this, around £21 billion came from England, nearly £1.7 billion was from Scotland, over £800 million came from Wales and more than £400 million was from Northern Ireland, according to Royal London.

It made the findings following analysis of a Freedom of Information (FOI) response from HM Revenue and Customs (HMRC), as well as using data from published sources.

The tax paid by pensioners would be on various sources of income, such as employment, self-employment and property.

Royal London found that between the mid-1990s and the mid-2010s, the number of taxpayers aged over 65 has nearly doubled - from 3.32 million in 1995-96 to 6.49 million in 2015-16 - the most recent year for which detailed figures are available.

It is estimated that the number has broadly stabilised since then, and stands at around 6.37 million in 2018-19, Royal London said.

Figures supplied to Royal London for 2015-16 also included around 400,000 women who had reached their state pension age but were aged under 65.

It found that among the 6.87 million taxpaying pensioners in 2015-16, the average annual tax bill was £3,522.

Some 3.87 million men paid an average bill of £4,341, while three million women paid £2,467 on average.

Royal London also identified Surrey as the hotspot with the highest total income tax bill paid by pensioners. At £961 million, pensioners in Surrey paid a higher total bill than those across the whole of Wales.

Looking at average pensioner tax bills, the highest were found in the London borough of Kensington and Chelsea - where the average pensioner who pays income tax forks out £32,250. The London boroughs of Westminster, Camden, Barnet and Hammersmith and Fulham were also in the top 10.

Sir 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."

Here are the top 10 local authority areas with the highest average pensioner income tax bills, according to Royal London:

1. Kensington and Chelsea, £32,250
2. Westminster, £28,938
3. Camden, £18,692
4. Epping Forest, £14,133
5. South Buckinghamshire, £14,111
6. Barnet, £9,606
7. Elmbridge, £9,500
8. Hammersmith and Fulham, £8,462
9. Mole Valley, £8,000
10. Cotswold, £7,769

And here are the 10 local authority areas with the lowest average income tax bills paid by pensioners, according to Royal London:

1. Redcar and Cleveland, £1,737
2. Sunderland, £1,727
3. Coventry, £1,700
4. Blackpool, £1,667
5. Sandwell, £1,667
6. East Ayrshire, £1,667
7. Kingston upon Hull, £1,444
8. Blaenau Gwent, £1,286
9. Stockton-on-Tees, £1,192
10. Stoke-on-Trent, £1,192

And here are the total pensioner income tax bills in 2015-16 across the nations and regions:

- North East, £626 million
- North West, £2.15 billion
- Yorkshire and the Humber, £1.51 billion
- East Midlands, £1.42 billion
- West Midlands, £1.69 billion
- East of England, £2.68 billion
- London, £3.62 billion
- South East, £4.8 billion
- South West, £2.46 billion
- Wales, £832 million
- Scotland, £1.69 billion
- Northern Ireland, £411 million

A Treasury spokesman said: "The Government has made security in retirement a central part of its reforms since 2010 through the introduction of automatic enrolment, the single tier new state pension and the triple lock.

"We want to encourage pension saving, to help ensure that people have an income, or funds on which they can draw, throughout retirement.

"This is why, for the majority of savers, pension contributions are tax-free. In 2016/17, people benefited from income tax and employer National Insurance Contributions relief worth more than £50 billion."