HMRC warns state pensioners they've 'breached' threshold 'for first time'

State pensioners have been left panicking and "inundating" HMRC with calls, according to the boss of the taxman. The boss of HM Revenue and Customs has blamed its declining customer service on the surge in pensioners paying income tax.

Sir Jim Harra was questioned by the Public Accounts Committee (PAC) on Thursday and warned there had been a rise in enquiries from taxpayers due to frozen thresholds as well as state pensioners paying tax for the first time.

Sir Jim said: “The state pension has always been a taxable source of income but obviously a combination of the frozen tax allowances and the triple lock mean that more and more state pensioners find that their total income is large enough to be subject to income tax.”

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He said the rise in queries meant continued “upward pressure” on HMRC’s services. Sir Jim added: “That is one of the reasons why our customer service levels have been below where we want them to be.” The number of retirees paying income tax for the first time is set to rise by 350,000 next year due to the triple lock pledge, which will see the state pension increase by 4.1 per cent in April 2025.

The Government has decided to keep income tax thresholds frozen until 2030, meaning more pensioners’ income will breach the tax-free £12,570 personal allowance. Sir Jim told MPs: “We try to minimise the extent to which state pensioners have to engage with the self-assessment tax system. But obviously, as they come on to the tax system for the first time, when they receive those bills from us, that can come as a surprise to them, it’s not something they’ve experienced before, and therefore it can generate contact with us to query what it is or if they’re worried about payment.

“I guess people will become more familiar with that over time but as more and more come in, that is frictional contact that we receive.” Myrtle Lloyd, director general of customer services at HMRC, said: “The 70-minute limiter is a technological limiter because at very busy times if you’ve got loads of people waiting in excess of 70 minutes, then it brings the system down.”