Pensioners paid £4.4bn more in income tax than UK government claimed

Pedro Gonçalves
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Pensioners paid £4.4bn more in income tax than UK government claimed

The UK government has been accused of "sneaking out" figures after it emerged pensioners paid £4.4bn more in income tax on their pensions in 2016-17 than had previously been expected.

Retirees actually paid £17.9bn in income tax in 2016/17, compared to a previously published estimate of £13.5bnn: a £4.4bn difference compared to the original forecast.

In its pension tax relief data published this week, HM Revenue & Customs stated in a footnote that the calculation of tax being paid by pensioners has changed. Instead of using a sample survey, the figures are now based on real time information supplied by pension schemes. 

It is outrageous that the Government has sneaked out these massive revisions to the figures for the amount that pensioners pay in tax without any comment"

This means that the taxman has corrected its own figures which explains the £4.4bn difference.

Analysis from life insurance and pensions company Royal London went on to show the government made billions of pounds more on tax relief on pension contributions than previously thought.

The taxman took home £5bn more than originally estimated, with the amount of tax relief on pensions contributions coming in at £1.3bn lower than forecast.

Sir Steve Webb said: "It is outrageous that the Government has sneaked out these massive revisions to the figures for the amount that pensioners pay in tax without any comment.

"It is clear that pensioners who have worked hard and saved hard are putting billions extra back into the economy through the tax on their pensions.

"The revised figures also show that the cost of tax relief on pension contributions is much lower than thought."

The Chancellor of the Exchequer Philip Hammond said last week that the current pension tax reliefs are "extraordinarily generous and are among the most expensive elements of tax relief in the system". The new figures seem to challenge that.

Pension income is taxable, except for the 25% lump sum. Income from Isas is not taxable, but savers do not get the same tax breaks on contributions as they do with a pension.

 

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