Nearly 18million Brits to be hit with new tax as Rachel Reeves leans on pensioners AGAIN to make up Budget shortfall

NEARLY 18 million Brits will be hit with a new tax.

Chancellor Rachel Reeves is set to lean on pensioners again to make up the Budget shortfall.

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It comes as the Winter Fuel Payment will be restricted to those who receive Pension Credit or other means-tested benefits - meaning around 10 million OAPs will lose £200-300.

In total, 8.2 million people over 60 will be dragged into paying income tax by 2027/28, according to analysis by HM Revenue & Customs (HMRC).

And those are only some of the millions of households expected to have to start paying the levy as a result of the ongoing freeze to tax thresholds.

The Chancellor has pledged to then begin raising thresholds in line with inflation from 2028/29.

Data provided by HMRC through a freedom of information (FOI) request by wealth manager Quilter shows nearly 18million people will be forced to pay income tax overall.

Of those, 11.6million will be affected over the next three years, with 8.2million of those individuals over the age of 60.

This suggests millions of people in receipt of state pension or other pensions will start paying tax on their retirement income for the first time.

Additionally, 12million people are set to be dragged into the higher rate of income tax, which is 40% of any income over £50,271, with 8.2million expected to be hit in the next three years.

Normally, tax thresholds increase every year to account for the fact that wages have risen in line with inflation, as this stops people being left worse off in real terms.

But in April 2021, the then-Conservative government decided to freeze all tax thresholds, and these are now due to stay frozen until 2028.

It did this to raise extra cash, as freezing the thresholds means more people would pay tax, or pay tax at a higher rate.

This process is known as fiscal drag, where workers are dragged into higher tax brackets as their pay has increased with inflation but the tax thresholds have not changed.

For pensioners, the triple lock - which ensures the state pension rises by the highest of inflation, 2.5% or wage growth - boosts the state pension while thresholds don't rise with it.

But the latest figures show this has leapt up to almost 30million people affected in total, with 18million starting to pay tax and 12million paying at a higher rate.

Rachael Griffin, tax and financial planning expert at Quilter, told The Sun: “The number of people expected to pay income tax for the first time, or at a higher rate, by 2027/28 is set to rise exponentially due to the continued freeze on tax thresholds.

"As incomes rise, including state pension income, more people are being dragged into paying tax for the first time or into higher tax brackets, a phenomenon known as fiscal drag.

"Even without an explicit tax rise, the government will continue to collect more from taxpayers each year by keeping thresholds static.

"What’s more, as the state pension rises while the personal allowance remains stagnant, many pensioners will soon find themselves having to pay back a proportion of their state pension."

Around 650,000 pensioners were forced to start paying income tax from this month as a result of fiscal drag.

It came after the state pension increased by just over £470 a year from April 6.