The brink hasn’t modified since 2021 and is not set to for an additional 5 years
Chancellor of the Exchequer Rachel Reeves (Picture: Anadolu, Anadolu through Getty Photographs)
Nearly two million folks throughout the UK have been pushed into the higher-rate earnings tax bracket because the starting of the last decade, recent figures reveal. A complete of 5.76 million taxpayers had been accountable for the upper fee throughout the 2023/24 tax 12 months, in response to HM Income and Customs.
This represents a 50% enhance from 3.83 million in 2019/20. Some 654,000 folks had been added to the higher-rate bracket between 2022/23 and 2023/24, a year-on-year surge of 13%. HMRC recognised the rise is “more likely to be because of the unchanged greater fee threshold and will increase in earnings, largely from employment, leading to extra taxpayers being introduced into the upper fee of tax.”
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The brink at which individuals start paying the upper fee of earnings tax of 40% has remained frozen at £50,271 since 2021/22. Tax thresholds historically used to extend according to inflation, however the freeze – carried out by the earlier Conservative authorities – has resulted in additional folks being pulled into the upper bracket as their wages have risen.
Chancellor of the Exchequer Rachel Reeves confirmed on the Funds in November 2025 that the freeze will stay in place till 2030/31, that means further persons are anticipated to expertise so-called “fiscal drag” and discover themselves accountable for the upper fee. HMRC’s figures display that higher-rate payers accounted for 15.7% of all UK taxpayers in 2023/24, practically one in six, up from 12.2% in 2019/20, or roughly one in eight. Larger-rate taxpayers accounted for 32.0% of the whole income collected by the Authorities by way of earnings tax within the 12 months to March 2024. There have been 29.40 million fundamental fee taxpayers in 2023/24, up practically three million from 26.50 million in 2019/20.
The variety of fundamental fee taxpayers rose by 1.15 million between 2022/23 and 2023/24. HMRC mentioned this rise was “pushed by the non-public allowance remaining unchanged at £12,570 alongside rising incomes, which has elevated the quantity of earnings taxed on the fundamental fee and introduced extra people into paying earnings tax”.
A freeze on the non-public allowance threshold – that means earnings as much as £12,750 stays untaxed – has been in place since 2021/22 and is about to proceed till 2030/31. Primary-rate payers contributed 29.9% of the whole income gathered by the Authorities in 2023/24, marginally under the 32.0% determine recorded for higher-rate payers.
The variety of folks paying the extra fee of earnings tax surged significantly year-on-year from 570,000 in 2022/23 to 893,000 in 2023/24, a considerable rise of 57%. The extra tax fee of 45% applies to earnings over £125,140.
These 893,000 additional-rate payers represented simply 2.4% of all taxpayers in 2023/24 but had been liable for 37.7% of tax collected.
Sarah Coles, head of private finance at AJ Bell, mentioned: “Nearly eight million folks counting on their pension for his or her fundamental supply of earnings are handing over £24 billion in tax yearly – practically half one million of whom are paying higher-rate tax.
“In the meantime, greater earners are shouldering an extremely hefty tax burden, with greater and additional-rate taxpayers handing over nearly 70% of all tax between them.
“Frozen tax thresholds imply that is solely going to worsen for everybody. On this setting, it is vital to make plans to make sure you do not pay greater than your fair proportion of tax.”
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