State pensioners face letter from hmrc demanding £2 over 'nonsensical' rule

THE IMPACT OF FISCAL DRAG ON PENSION INCOMES HAS BEEN REVEALED, WITH NINE MILLION OLDER PEOPLE FACING PAYING TAX TO HMRC. 06:22, 05 Jun 2025 Nine million state pensioners are set to pay

'nonsensical' tax on retirement income in 2025, it has been warned. The impact of fiscal drag on pension incomes has been revealed, with nine million older people facing paying tax

to HMRC. Data from the Department for Work and Pensions (DWP) reveals that 8.51 million pensioners paid income tax to HM Revenue and Customs (HMRC) in the 2024/25 financial year. The

Personal Allowance remains frozen at £12,570 until the start of the 2027/28 tax year, meaning more pensioners will be pushed into paying tax on their retirement income as their state pension

increases under the triple lock. READ MORE UK FACES 32C HEATWAVE ON 'FIVE DATES' IN JUNE WITH EXACT DAY IT STARTS ANNOUNCED Steve Webb, a partner at pensions firm LCP, and former

Liberal Democrats Pensions Minister who created the Triple Lock mechanism, said: "This could mean hundreds of thousands of pensioners are taxed on just £8 per year, with a tax bill of

£1.60." The pensions expert warned of a "nonsensical situation" and added: "A combination of an increasing state pension and frozen tax thresholds means we will soon be

in the nonsensical situation where the new state pension will be just a few pounds above the income tax threshold." Article continues below He added: "Long gone are the days when

retirement meant no longer having to deal with the tax office." The Triple Lock – which guarantees that the State Pension increases annually by the highest of inflation, average

earnings growth or 2.5% – means the basic and new State Pensions are increasing by 4.1%, well above the current level of inflation. Speaking previously, Work and Pensions Secretary Liz

Kendall said: "Our ironclad commitment to the Triple Lock gives pensioners across the country the certainty and security they need to live a full life in retirement. "We are

putting more money in people’s pockets and driving up household income as part of our Plan for Change." Article continues below And Minister for Pensions Torsten Bell said:

"Raising the State Pension and rescuing the NHS – these are this government’s priorities to give all pensioners the dignity they deserve in their retirement. Those who have worked hard

throughout their lives, paying into the system, are owed nothing less. "We’re improving the lives of millions of pensioners through our £7.84 billion additional funding for the State

Pension this year. "That means up to £470 extra in pensioners’ pockets from this week and comes alongside our work to boost Pension Credit uptake, and the £26 billion we’ve invested in

the NHS that has seen waiting lists in England fall for 5 months in a row."