Retired households paying up to 48% in tax

Their individual average tax bill amounts to nearly £8,000 a year with the UK’s 7.1 million retired households contributing £59.23 billion to the Government from taxes.

The average gross annual income for retired households is £25,051 and their post-tax income is £17,593 amounting to an annual tax bill of £7,971.

However the tax bill for less well-off households rises to 48%. The lowest-earning 10% have gross incomes of £8,725 and post-tax incomes of £4,527.

The highest-earning tenth of retired households have gross incomes of £66,212 and post-tax incomes of £46,523, which equates to a total tax bill of 30%.

VAT is the biggest tax bill for the average retired household with the total paid a year amounting to £2,278, narrowly ahead of the £2,050 they pay each year in income tax. Council tax takes the third biggest slice at an average £1,261 a year.

Will Hale, CEO at Key, said: “Paying tax does not stop when you stop working and retired households have to keep on budgeting and planning ahead on how to pay income tax and council tax bills.

“The average bills from direct and indirect tax that retired households face take a substantial bite out of incomes underlining how important it is to consider all potential sources of income in retirement.

“Property wealth is making a major contribution to retirement standards of living with tens of thousands a year using money tied up in their homes to transform their finances. Good specialist advice is key to ensuring that older homeowners receive the most benefit from their property wealth.”