Thank you for contacting me about the state pension and income tax for pensioners.
If anyone is receiving just the state pension and any pension credit, they will not need to pay tax. Pensions have increased considerably since 2010. The two most recent increases were 10.1% in April 2023 and 8.5% this April.
If you receive extra pension income, it is possible that you will be moving into the 20% tax bracket for the part of your income that is above the personal allowance of £12,570 or even higher if your income is over £50,000.
The tax allowance has almost doubled since 2010 and is the most generous in the G7. It was frozen to help start to pay for the considerable sums paid to help people through the Covid years. Further support was given to every household, particularly pensioners, to help with the cost of living challenge that was driven by the energy shock after Putin’s invasion of Ukraine. Pensioners in the UK receive a number of benefits including help with fuel payments, free prescriptions and subsidised travel on public transport.
Regarding tax more broadly, while it is the case that the tax take overall is higher, this is largely due to an increase in tax taken from people paying the highest rate of income tax and in corporation tax. This reflects a successful strategy by the government to encourage higher rate payers to have their significant income paid to them in the UK – which has resulted in higher tax receipts. Meanwhile, the average earner in the UK now has the lowest effective personal tax rate since 1975. Pensioners still working do not pay national insurance contributions, though their employers do and they are eligible for several working-age benefits.