The number of higher rate tax payers surged. (Image: Getty)
The number of higher-rate taxpayers has seen a significant increase as wage growth and frozen thresholds pull more workers into paying more tax. New statistics revealed a rise in the number of taxpayers across the board between the 2021 to 2022 tax year and the 2022 to 2023 one. The most substantial increase was , which surged by 15.3% – or 680,000 more people – to 5.1 million.
The number of 45% additional rate taxpayers rose by 9.5% to 600,000.There was also a 2.9% increase, or 790,000 more people, in the number of individuals paying the 20% basic rate of income tax, as more low-income earners were drawn into the net. These figures are a year behind, so there may be many more who have been
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Salary sacrifice pension schemes can help people boost their savings. (Image: Getty)
As wages continue to climb, even more low earners will be caught in the tax net and the number of taxpayers in higher rate bands will grow.
In the Autumn Budget, Rachel Reeves announced that the freeze on thresholds, which has been in place since 2021, will continue until the end of 2029.
A report by the Institute for Fiscal Studies estimated that by 2027/28, 8.8 million taxpayers
The number of additional-rate taxpayers is set to rise when the 2023/24 figures are finalised, following a reduction in the threshold from £150,000 to £125,140 starting in April 2023.
The Office of Budget Responsibility predicted last year that the freeze would generate £33.6 billion in the 2028/29 tax year.
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Some taxpayers choose to boost their pension contributions to benefit from tax relief at their higher rate of tax through
There’s still time for individuals to make one-off contributions to their pension, or even to sacrifice a bonus into their pension if their payroll permits, to utilise some of their annual allowance before it expires on April 5.
While the pension annual allowance isn’t entirely lost each year, as it can be possible to carry forward previous years’ allowances, this is a complication many would rather avoid.
Those with a threshold income over £200,000 and adjusted income of £260,000 need to take special care to calculate their allowance and should seek professional advice before making a large contribution.