Another 500,000 people are now in the 45% tax bracket

Another 500,000 people are now in the 45% tax bracket

Recent data released has shown that the number of additional taxpayers facing the 45% tax rate has increased rapidly since 2022-23, with more than 1.2m people now in this bracket.

Percentage wise additional rate taxpayers now make up 3.1% of the total income of the UK tax paying population.

From 6 April 2023 the additional rate was reduced from £150,000 to £125,140 which will be a mitigating factor for the huge increase in taxpayers.

The number of higher rate taxpayers has also increased in this time period, with 38.7% more people expecting to be paying the higher rate this tax year than in 2022-23 when there were 5.1m. Going forward to this tax year there is predicted to be 7m higher rate taxpayers who will pay 18.1% of the total tax take.

The other key reason for this is successive governments’ decisions to freeze the income tax thresholds since the Conservative Government started this in April 2021.

Although the initial plan was originally to review the tax thresholds in 2028, this is not a guarantee, and of course as salaries increase, and if thresholds do remain frozen, then many more people across the earning spectrum will continue to be dragged into higher tax brackets through no change in their real income.