How to shield your savings from tax grab

ISAs allow savers to stay potentially below key thresholds'

- By HARVEY JONES

PRETTY much everybody is paying more tax these days, and pensioners are no exception.

With income tax thresholds frozen for another five years, the pressure is only set to intensify. Taxes hit an all-time high under the Conservatives, but Chancellor Rachel Reeves has already added another £70billion to the burden, and counting.

Income, savings, rental profits, dividends, capital gains, inheritances and pensions are all being taxed more. The squeeze shows no sign of easing, which means we all need to stay alert and look for ways to fight back.

TAXING

There are roughly 13 million state pensioners today, of whom 8.2 million now pay income tax, figures show.

In the 2023/24 tax year an extra one million pensioners were dragged into the net. The figure is likely to be much higher today, as the freeze on income tax thresholds continues until 2031.

While more people are working beyond retirement age to make ends meet, that’s not the main cause.

Of those paying tax, 7.8 million say their primary income is their pension, so they're being taxed hard too.

The vast majority of pensioner taxpayers are on the basic rate of 20%, but nearly one million now pay higher rate tax at 40%, while around 30,000 are hit by the additional 45% rate.

Sarah Coles, head of personal finance at AJ Bell, said many pensioners are caught in a vicious circle. “More people are working later in life to close the income gap, then paying tax on their earnings too.”