Frozen income tax thresholds combined with significant state pension rises may push more pensioners into paying tax, LCP said.
Some pensioners could have to start setting money aside for out-of-the-blue tax bills, a consultancy firm is warning.
It warned that pensioners could have received – and spent – all of their pension during one financial year only to receive a tax bill on that pension the following year. While some of these pensioners will have private pensions that can be used to collect any tax due, others will have large state pensions precisely because they did not make alternative private provision, it said.
Sir Steve Webb, a former pensions minister who is now partner at LCP said: “Millions of pensioners have been dragged into the tax net for the first time in recent years, primarily because of the multi-year freeze on tax thresholds. But wages have been rising at a higher rate, with a figure of 8.5% potentially being used to calculate the state pension rise.
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