The Civil Service Pensioner Alliance (CSPA) has raised serious concerns about the impact of the frozen HMRC personal tax-free allowance on UK pensioners. While income tax rates have remained unchanged, the personal allowance has been held at £12,570 since 2021, a move that the CSPA calls “unfair” and detrimental to retirees across the country.
This freeze, combined with rising inflation, means that more pensioners are being pushed into the tax system through “fiscal drag.” Pensions and wages have increased to keep pace with inflation, but because the personal allowance has not, many pensioners now face income tax charges for the first time—even though their real income and living standards have barely improved.
Data from the Institute for Fiscal Studies (IFS) backs this warning. In 2021–22, approximately 6.7 million pensioners paid income tax. By 2025–26, that number is expected to rise sharply to around 8.8 million. Projections indicate that by 2030, up to 9.3 million pensioners—about three quarters of all pensioners—might be paying income tax if the personal allowance remains unchanged.
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Alarmingly, by 2027–28, the full State Pension amount from the Department for Work and Pensions will surpass the current personal allowance threshold, potentially meaning that pensioners relying solely on the State Pension could become liable to pay income tax for the first time in their lives.
Had the personal allowance increased in line with inflation since 2021, it would now be valued between £15,000 and £17,000, rather than remaining at £12,570. The gap between stagnant tax thresholds and rising costs effectively results in a stealth tax hike.
The CSPA argues this approach unfairly penalizes pensioners on fixed and modest incomes. It urges the government to adjust income tax thresholds in line with inflation to prevent unnecessary tax burdens on older people. The campaign group also calls for maintaining protections such as the 25% tax-free pension lump sum and safeguarding tax-free savings vehicles like ISAs to ensure pensioners’ financial security.
By taking these steps, pensioners would be better shielded from undue taxation caused solely by the failure to keep pace with inflation, helping preserve their financial well-being in later life.