Two million more people pay a higher tax rate


Rise in people paying higher income tax rates comes as cost of living soars

There are nearly two million higher and additional rate taxpayers in the UK, according to HM Revenue and Customers (HMRC).

The number of people paying 40% or 45% tax has risen from 4.25 million to more than 6.1 million workers since 2019, the figures show.

It’s about price growing at the fastest rate in 40 years and workers and unions are demanding wage increases to cope.

The Treasury has been asked to reconsider tax brackets, but said most taxpayers are still paying the base rate.

He had made “difficult but responsible decisions” to “avoid putting future generations in debt with more debt” after record levels of borrowing during the pandemic, he said.

“Maintaining income tax thresholds is a progressive approach. The vast majority of taxpayers will still pay the basic rate and the UK still has the highest personal allowance in the G20,” added the gatekeeper. word.

Against this approach, former Liberal Democrat pensions minister Sir Steve Webb said “paying a higher rate of tax ‘is only for the wealthy’.

But that has changed “very dramatically” in recent years, added the partner at LCP consultants.

“People who would not consider themselves particularly wealthy can now easily face an income tax rate of 40% and around 1 in 5 taxpayers will soon find themselves in the highest tax bracket,” a- he declared.

Higher rate taxpayers paying 40% earn £43,663 or more in Scotland and £50,271 in England, Northern Ireland and Wales. They pay no tax on the first £12,570 of income covered by Personal Allowance.

According to HMRC, they represent around 16.2% of the total taxpayer population in 2022-23.

Meanwhile, top rate taxpayers earning over £150,000 and paying 45 per cent tax make up around 1.9 per cent, he said.

The number of higher rate taxpayers is expected to increase further as the tax threshold has been frozen by the government until 2026.

When income tax brackets do not move with inflation, it is called a “tax brake”.

This causes more taxpayers to fall into higher tax brackets, which increases overall income tax payments and generates more money for the treasury.

Clive Gawthorpe, a partner at accounting firm UHY Hacker Young, said the government needed to “urgently” review these tax brackets.

“Because of inflation, taxpayers sucked into the top bracket already had to stretch their monthly paychecks further – without the added burden of a higher tax,” he added.

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