Tax bills eat up chunk of post-retirement income
RETIRED households pay almost a third of their income on a combination of direct and indirect taxes each year, according to research from equity release specialist Key.
Each individual taxpayer pays an average of £8000 a year on an average income of £25,000, making a total of just under £60billion in tax from the UK’s seven million retired households.
The impact of direct and indirect tax is felt most by households with the lowest overall income, according to the research.
The lowest-earning 10 per cent have gross incomes of £8725 and post-tax incomes of £4527, equating to a total tax bill of 48 per cent.
The highest-earning 10th 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 per cent – significantly lower than the total tax bill of lower earning households.
VAT is the biggest tax bill for the average retired household, with the total paid a year amounting to £2278.
They pay £2050 in income tax.
Council tax takes the third biggest slice at an average of £1261 a year.
Average post-tax incomes for retired households have increased by £224 on the previous year to £17,593, Key’s analysis found. But the tax bill has risen by £513 on the previous year’s £7458.
Will Hale, CEO at Key, said: “Paying tax does not stop when you stop working and retired households have to keep on budgeting 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 of people using money tied up in their homes to transform their finances.
“Good specialist advice is key.”
● Never give out PINs or account details to anyone who calls and says they are from your bank. ● Power of attorney will help your relatives or friends deal with your affairs if you are unable to do it yourself.