2.8 million more higher rate taxpayers

2.8 million more higher rate taxpayers

Feb 28, 2024

Millions more people are paying income tax than in 2010 as 4.5m taxpayers are caught by rising taxes and frozen thresholds with majority hit by 40% rate

The total number of taxpayers has increased from 31m to 35.5m since the Conservatives came to power in 2010, with 2.8m people paying higher rate tax at 40%, accounting for 16% of taxpayers, research by the TaxPayers’ Alliance showed.

The number of higher rate taxpayers has soared in the last three years since thresholds were frozen in 2021-22 by then Chancellor Rishi Sunak. in the last three years alone, an additional 1m people have started paying higher rate tax while 1.1m have to pay basic rate income tax for the first time.

The freeze is set to stay until 2028, pulling millions more into tax through fiscal drag with the Institute for Fiscal Studies (IFS) projecting that the figure will rise to 38m by the 2027-28 tax year.

Total income tax receipts are forecast to have risen from £195.3bn in 2020-21, the last financial year before the freeze, to £277.2bn in 2023-24. This figure is set to rise to £346.2bn by the time the freeze is reviewed.

It is expected that £40bn of this increase is a result of the freeze on personal tax thresholds and inflation.

Since thresholds were frozen, the north east, Yorkshire and the Humber and Wales are set to be the UK regions with the largest percentage increases in the total number of people paying income tax.

By contrast, London saw the smallest percentage increase of people paying income tax since the rates were frozen across all tax bands.

‘The impact of freezing income tax thresholds has been particularly harmful as average weekly regular earnings have risen by 15% since April 2021, causing more people to fall into the basic and higher rates of income tax,’ the TaxPayers’ Alliance said.

‘This means that as a result of thresholds not being maintained with average wages, along with other factors, that people such as nurses, teachers and police officers are finding themselves paying tax rates designed specifically for those with significantly higher earnings.’

The IFS estimates that by 2027-28 more than one in eight nurses and a quarter of teachers are set to pay higher rate tax.