Official HMRC figures show that in 2024–25, around 77,000 pensioners earned between £100,000 and £125,140, the income range where personal allowance tapering creates an effective 62 per cent tax rate. This marks a sharp rise from 38,000 in 2021–22.
Across the wider workforce, 725,000 workers are expected to fall into the same high-tax trap this year, more than double the 300,000 affected in 2018. The number is forecast to reach 850,000 by 2028–29 if the current freeze on tax thresholds continues.
Craig Rickman, a pensions expert at Interactive Investor, warned that the policy risks driving older professionals out of the workforce.
“With the deep freeze on income tax bands set to endure until 2028–29 and fears it could be extended further , thousands more people above state pension age will face punitive rates of tax on parts of their income,” he said.
“As taxes take an even bigger bite, many older high earners will start questioning whether it’s worth working as much, given the heavy burden.”
Tax specialist Dan Neidle added that the 62 per cent effective rate could have serious consequences for public services and economic productivity.
“This is clearly having an impact on the NHS and on the wider economy,” Neidle said. “If it’s having a material effect, the Treasury must look seriously at how to smooth out these discontinuities in the tax system.”
Ahead of the Labour government’s Budget on 26 November, a Treasury spokesperson defended the Government’s record on pensioner welfare:
“We are committed to helping pensioners live their lives with dignity and respect. Thanks to our commitment to the triple lock, millions will see their pensions rise by up to £1,900 this parliament.”
