These thresholds determine how much individuals can earn before taxation begins, currently standing at £12,570 for the basic 20 per cent band, £50,270 for the higher 40 per cent band, and £125,140 for the additional 45 per cent band.

The Times reported that the number of pensioners and savers being stung by end-of-year tax bills has doubled in two years, figures show. Experts said that frozen tax thresholds and the rising state pension had driven a surge in simple assessment letters from HM Revenue and Customs (HMRC).

More than 1.32 million people received brown letters telling them they owed tax in the 2023-24 financial year, up from 675,000 in 2021-22, according to data from a freedom of information request to HMRC.

HMRC carries out a simple assessment for individuals who owe tax on their income but no longer have a PAYE code that deducts tax at source. This primarily impacts pensioners, but can also apply to savers who owe tax on their interest if it surpasses the £1,000 personal allowance.

Demands for simple assessments are often for modest amounts. Nearly a quarter of those issued in 2023-24 were for less than £100, and half of all demands were for less than £300, according to HMRC. This news emerges as an increasing number of retirees are being compelled to pay income tax for the first time since they ceased working, as static tax thresholds clash with the escalating state pension.

The full state pension will rise to £12,548 annually in April due to the triple lock, which guarantees the benefit increases each year in line with the highest of inflation, wage growth or 2.5 per cent.

Consequently, the payment will be just short of exceeding the tax-free personal allowance, which is frozen at £12,570 until at least 2031. The allowance has not increased since April 2021.

The state pension is forecasted to surpass the personal allowance in April 2027. Out of the 13 million state pensioners, approximately 9 million receive the old version (pre-2016), which can be significantly more beneficial than the new version. This is due to an additional earnings-related system from the 1970s, as well as generous increases for deferring the pension by a year or more.

These additional payments could render a pensioner liable for tax.

Steve Webb, a former pensions minister who now works as a partner at consultancy firm LCP, said: “The continued freezing of the income tax personal allowance means that the numbers getting unwelcome end-of-year tax demands have soared.”

Many of these people will be pensioners whose only income is the state pension, and they now get an annual tax demand, with the amounts growing each year.

“Although the government has indicated it may address this issue for a subset of pensioners from 2027, a much wider-ranging solution is needed.”

LCP forecasts that the number of individuals receiving simple assessments will exceed two million when data for 2024-25 becomes available in the next tax year.

In the previous year’s autumn budget, Chancellor Rachel Reeves announced that, starting from April 2027, those whose sole income is the full new state pension will be exempt from paying income tax. The specifics of how this policy will be implemented are yet to be disclosed.

HMRC stated that the issue was a matter for the Treasury, as it pertains to decisions made by the government. HM Treasury was approached for a comment.

Personal finance expert Martin Lewis interviewed the Chancellor after the budget last November and asked about pensioners who will be marginally over the threshold. Mr Lewis pointed out that the full new State Pension is £12,558 and the personal allowance is frozen at £12.570 until 2031 – which is the amount a person can earn tax free each year.

Mr Lewis has stated that the new state pension will be £30 below the allowance from April 2026. He further explained: “So anyone who’s got any other form of earnings – well you’re going to go over it if you’ve got the full new state pension you will have to pay tax.

“But from 2027 because we know the state pension has to rise by a minimum 2.5 per cent because of the triple lock here’s a projection. The minimum it could rise because of the triple lock 2027 it’s going to be about £12,861, £300 more than the tax free allowance as that’s staying stable and it will go more and more and more.”

According to predictions on the Martin Lewis Money Show Live, the minimum new state pensions based on the lowest increase would be £12,861 in 2027, £13,183 in 2028, £13,512 in 2029 and £13,850 in 2030.

He continued: “So you can see the issue that’s going on. My main concern was the admin. How are we going to have 90-year-olds doing self assessment forms when they’re only earning £50 over the limit?” Mr Lewis referred back to his interview with Chancellor Rachel Reeves after the budget where he asked a question from a viewer named Rebecca: “Does my 85-year-old father who is living with dementia now have to complete a tax return as his state pension will take him over the personal allowance.”

Ms Reeves responded: “So if you just have a state pension and you don’t have any other pension you don’t have to fill in a tax return. I make that commitment for this Parliament. You’re right 2027 looks like the time it will cross over. We are working on a solution as we speak to ensure we’re not going after tiny amounts of money.”

Mr Lewis queried: “People will have to pay the tax, they just won’t have to do a return or will they not have to pay the tax?” Ms Reeves answered: “In this Parliament they won’t have to pay the tax. Further out I’m not able to make any commitments.”

On his ITV show, he further added: “What I find interesting is imagine someone who is a little bit off the full state pension. And they had a very small private pension but they still earned less than the full state pension. Under those rules they would have to pay tax and therefore they would be punished for having a private pension. Which is why I think the thing isn’t fully thought through yet.”