Retired households are paying £347 a year more in direct taxes

Retired households are paying £347 a year more in direct taxes

Our latest analysis shows that retired households have seen their annual bill from direct taxes increase by £347 as incomes have increased.

Their average bill for direct taxes is £5,308 a year currently after a 7% increase on the previous year’s £4,961 annually, the analysis of the most recent Government data shows.

The increase in individual tax bills from income tax and council tax has boosted the collective tax take from retired households by more than £6.2 billion highlighting the contribution of older people to the UK’s finances.

Most of the increase in the tax bill is driven by a rise in the pre-tax incomes of retired households which the most recent Government data shows are £33,997 compared with £32,265 previously. That adds up to a £1,732 increase which equates to a 5.3% rise.

Our analysis found most of the increase in incomes was due to increased payouts from private pensions and investment income.

Income tax accounted for nearly 70% of the total paid out in direct taxes with council tax making up almost all of the rest bar a small amount paid in National Insurance in some retired households.

SIPP Managing Director Hrishi Kulkarni said: “Taxation levels are increasing across the board with the decision to not uprate income tax thresholds in line with inflation meaning more people are paying tax and some are paying higher rates including retired households.

“The good news for retired households is that income from private pensions and investments are increasing and they are also in line for a major rise in the State Pension from next April. It is important however that retired households budget for their tax bills and maximise tax-free savings where possible.”

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