Tax Threshold Freeze: HMRC Data Shows Record 10.2 Million Over-65s

A record 10.2 million people aged 65 and over are projected to pay UK income tax in 2026–27, according to the latest tax threshold freeze HMRC data.

The total income tax-paying population is expected to reach 40.8 million, meaning over-65s will represent one-quarter of all taxpayers.

The rise does not mean tax rates have increased for every pensioner. Instead, the standard Personal Allowance has remained at £12,570 while State Pension payments, private pensions, wages and other taxable income have continued to grow.

This pushes more people above the tax-free threshold through a process known as fiscal drag.

The figures require an important qualification: HMRC’s 10.2 million category covers everyone aged 65 and over, including some people who have not reached State Pension age.

HMRC separately projects that 9.58 million taxpayers will be above State Pension age in 2026–27. The latest completed, or outturn, figures relate to 2023–24; figures for later years are projections.

Key Figures At A Glance

The full new State Pension figure is the 52-week equivalent of the £241.30 weekly rate for 2026–27.

What Does The Latest Tax Threshold Freeze HMRC Data Show?

The latest release projects 40.8 million individual income taxpayers in 2026–27, up from an estimated 36.7 million in the completed 2023–24 tax year.

Of the projected total, 10.2 million will be aged 65 or over and 9.58 million will be above State Pension age.

The difference between those two age categories matters. State Pension age is increasing gradually from 66 to 67 between 2026 and 2028, so a person aged 65 may still be working and may not yet qualify for the State Pension.

HMRC’s 2026–27 numbers are modelling estimates based on the 2023–24 Survey of Personal Incomes and economic assumptions consistent with the March 2026 fiscal forecast.They are not a final count of tax returns, payments or completed liabilities.

Why Are More Over-65s Paying Income Tax In 2026–27?

The main reason is that taxable incomes are rising while the Personal Allowance remains fixed at £12,570.

A person becomes an income taxpayer when their taxable income exceeds the allowances available to them, even when the headline tax rate has not changed.

The official statistical commentary said the projected rise was “mainly due to population and income growth combined with frozen Income Tax thresholds”.

Main Drivers Behind The Increase

• Pension payments are rising while the Personal Allowance remains unchanged.
• More people continue working beyond the age of 65.
• Private and workplace pensions add to State Pension income.
• Savings interest, rent and investment income may count towards taxable income.
• Population growth increases the overall number of potential taxpayers.

The threshold freeze does not affect all older people equally. Someone receiving less than the full State Pension and no other taxable income may remain below the allowance, while another person with employment earnings or a private pension may cross it more quickly.

How Has The Number Of Older Taxpayers Changed Since The Threshold Freeze Began?

The Growth In Over-65 Taxpayers

HMRC’s underlying table indicates that around 8.58 million people aged 65 and over paid income tax in 2023–24. The projected 10.2 million total for 2026–27 represents an increase of approximately 1.62 million, or almost 19%, in three tax years.

The 2026–27 figure is also about 700,000 higher than the projection for 2025–26. Readers can examine the official taxpayer age statistics, which distinguish taxpayers by age, sex and highest marginal tax rate.

How Does The Recent Increase Compare With Earlier Decades?

The number of over-65 taxpayers has risen more quickly in recent years than across some previous periods.

The supplied reference report calculated that the number increased by nearly three million from 2022 to 2026–27, compared with a rise of about 2.5 million between 2000 and 2019.

That comparison illustrates the acceleration, but it should not be attributed exclusively to the threshold freeze.

Population ageing, later retirement, pension growth and changes in employment also influence the number of older taxpayers.

Tax Threshold Freeze Timeline

How The Policy Developed

The extension through 2030–31 was announced at Autumn Budget 2025, although a future government or fiscal statement could amend the policy.

What Is Fiscal Drag And Why Does It Matter To Pensioners?

Fiscal drag describes what happens when tax allowances or band thresholds remain fixed while nominal incomes rise.

It is not a separate tax, but it can increase a person’s tax liability or bring them into the tax system for the first time.

For pensioners, annual State Pension uprating can move income closer to the Personal Allowance.

Private pension increases, employment earnings and savings income may then take total taxable income above the threshold.

For example, a pensioner whose taxable income rises from £12,400 to £13,000 would move from below the standard allowance to £430 above it.

Subject to their individual circumstances, only the amount above the allowance would be taxable, rather than the entire £13,000.

Fiscal drag can also move existing taxpayers into higher tax bands. HMRC expects the number of higher-rate taxpayers to increase substantially as earnings grow against frozen thresholds.

How Close Is The Full State Pension To The Personal Allowance?

The full new State Pension is £241.30 a week in 2026–27. Over 52 weeks, that is £12,547.60—only £22.40 below the standard £12,570 Personal Allowance.

That narrow gap means even a modest amount of additional taxable income could create a liability for someone receiving the full rate.

A small workplace pension, paid work, rent or taxable interest may be enough to take total income above the allowance.

Not everyone receives £241.30 a week. State Pension entitlement depends on a person’s National Insurance record, whether they fall under the new or pre-2016 system, and whether additions such as protected payments or deferred pension increments apply.

The full basic State Pension under the older system is £184.90 a week in 2026–27. Some recipients may also receive an additional State Pension or other taxable payments, so the basic weekly rate alone does not establish their final tax position.

Which Types Of Retirement Income Can Push Pensioners Over The Tax Threshold?

Taxable Retirement Income

Income tax is calculated using a person’s combined taxable income rather than considering each payment separately.

Income That May Count Towards The Total

• State Pension payments may count as taxable income.
• Workplace and personal pension payments are normally taxable.
• Employment and self-employment earnings may be included.
• Property income may count after applicable expenses and reliefs.
• Savings interest and dividends may be taxable above relevant allowances.
• Certain state benefits and investment income may also be included.

The State Pension tax guidance confirms that tax may be due when total annual income exceeds the Personal Allowance.

What Income May Receive Separate Allowances Or Tax Treatment?

Savings interest may fall within the Personal Savings Allowance, which is generally up to £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers.

Dividend income has a separate £500 allowance in 2026–27, while income and gains held within an Individual Savings Account are normally sheltered from personal tax.

Eligible spouses and civil partners may be able to transfer £1,260 of unused Personal Allowance through Marriage Allowance.

Private pension lump sums also have separate rules and limits; describing a withdrawal as a pension payment does not automatically make the entire amount tax-free.

How Could A Small Private Pension Create A Tax Bill?

Consider a simplified illustration for a taxpayer in England, Wales or Northern Ireland:

• Full new State Pension: £12,547.60.
• Private pension income: £1,200.
• Combined taxable income: £13,747.60.
• Income above the Personal Allowance: £1,177.60.
• Illustrative tax at 20%: £235.52.

This calculation assumes the standard allowance, no other deductions or reliefs, and a 20% basic rate.

Actual liabilities may differ, particularly for Scottish taxpayers or people with other allowances, expenses and income sources.

Does Being Aged Over 65 Automatically Make Someone A Pensioner Taxpayer?

No. The 10.2 million figure is an age category, not a count of people necessarily receiving the State Pension.

HMRC projects that 9.58 million taxpayers will be above State Pension age in 2026–27, compared with 10.2 million aged 65 and over.

For modelling, it uses a State Pension age of 66.25 during the year because the qualifying age is moving from 66 to 67.

Some people aged 65 will still be below State Pension age, while others may continue working after qualifying.

An older taxpayer could owe tax primarily because of employment, self-employment, property or investment income rather than pension payments.

For accuracy, the 10.2 million figure should therefore be described as “people aged 65 and over” or “over-65 taxpayers”, not simply as 10.2 million pensioners.

How Is The Tax Threshold Freeze Affecting The Wider UK Taxpayer Population?

The threshold freeze extends beyond retirement income. HMRC projects 31.4 million basic-rate taxpayers in 2026–27, alongside 7.7 million higher-rate taxpayers and 1.29 million additional-rate taxpayers.

A further 415,000 people are expected to be classed as savers-rate taxpayers. The higher-rate population is projected to rise from 5.76 million in 2023–24 to 7.7 million in 2026–27.

HMRC links much of this movement to earnings growth combined with a higher-rate threshold frozen at its 2021–22 level.

Across all income ranges, the average income tax liability is projected to rise from £7,470 in 2023–24 to £8,510 in 2026–27. That is an average across taxpayers rather than a prediction that every individual will pay £1,030 more.

Scottish taxpayers have different rates and bands for non-savings, non-dividend income.

The standard UK Personal Allowance normally applies, but Scottish pensioners with earnings or pension income should not assume that England’s band structure determines their final liability.

What Should Taxpayers Check Now, And What Happens Next?

Check Your Total Taxable Income

Older taxpayers should review all income expected between 6 April 2026 and 5 April 2027.

Information Worth Checking

• State Pension entitlement and annual payment amount.
• Workplace and personal pension statements.
• Earnings from employment or self-employment.
• Savings interest and dividend payments.
• Property, investment and taxable benefit income.
• PAYE tax codes used by employers or pension providers.

Looking at each income source separately can hide a potential liability because the tax calculation normally depends on the combined taxable total.

How Does HMRC Collect Tax On State Pension Income?

State Pension payments are made without tax being deducted directly. Where somebody also receives a private or workplace pension, the pension provider may deduct tax through PAYE, including tax attributable to State Pension income.

If the State Pension is a person’s only income and it exceeds their allowance, a Simple Assessment bill may be issued.

Tax may also be collected through employment earnings or reported through Self Assessment where the relevant conditions apply.

The current State Pension rates should be checked alongside the individual’s pension forecast and other income.

What Could Change Before The Threshold Freeze Ends?

Current policy keeps the Personal Allowance and key thresholds frozen through 2030–31, but future Budgets could shorten, extend or otherwise change that timetable.

State Pension rates are reviewed annually, and HMRC may revise taxpayer projections when new administrative and economic data becomes available.

The next annual statistics release is scheduled for May or June 2027. Until then, the 2026–27 figures should continue to be described as projections rather than final taxpayer totals.

Conclusion

The latest tax threshold freeze HMRC data projects that a record 10.2 million people aged 65 and over will pay income tax in 2026–27.

The increase reflects frozen tax allowances interacting with rising pensions, wages and other taxable income.

The most immediate pressure point is the £22.40 gap between the full new State Pension’s 52-week value and the standard Personal Allowance.

However, receiving a State Pension does not automatically produce a tax bill; liability depends on total taxable income and the allowances available.

It is also important to distinguish the 10.2 million over-65 figure from the separate projection of 9.58 million taxpayers above State Pension age.

Frequently Asked Questions

Is Income Tax Deducted Directly From State Pension Payments?

No. State Pension is normally paid without tax deducted. Tax may instead be collected through a workplace or private pension, employment PAYE, Simple Assessment or Self Assessment.

Do Pensioners Pay National Insurance On Their Pension Income?

State and private pension income is not normally subject to National Insurance.

People who continue working after State Pension age generally stop paying employee National Insurance, although employers may still have contribution obligations.

Can HMRC Change A Pension Provider’s PAYE Tax Code?

Yes. A tax code may be adjusted so a pension provider collects tax due on combined pension income, including State Pension. Multiple income sources can result in more than one tax code.

Does Savings Interest Count Towards A Pensioner’s Taxable Income?

Savings interest can count, but the Personal Savings Allowance and starting rate for savings may cover some or all of it. The amount available depends on other income and the taxpayer’s marginal rate.

Can Marriage Allowance Reduce A Pensioner’s Income Tax Bill?

Potentially. An eligible spouse or civil partner with unused Personal Allowance may transfer £1,260 to their partner, provided the relevant income and tax-band conditions are met.

Are Income Tax Bands Different For Pensioners Living In Scotland?

Scotland applies separate rates and bands to non-savings, non-dividend income. The Personal Allowance normally remains UK-wide, while savings and dividend taxation follows UK rules.

What Should Someone Do If HMRC’s Pension-Income Figure Is Wrong?

They should compare the calculation with pension letters, P60s and bank records.

A Simple Assessment calculation can generally be challenged within 60 days by explaining which figures are wrong and providing corrected amounts.

Note

This article provides general information for UK readers and does not constitute personal tax, pension, legal or financial advice.

Individual liabilities depend on total income, residence, allowances, tax codes and other circumstances.

Projected taxpayer figures may change when final tax-year information becomes available.

“Over-65 taxpayers” and “taxpayers above State Pension age” are separate statistical categories and should not be treated as interchangeable.