The number of higher-rate taxpayers has soared since 2023/24, as frozen thresholds continue to drag more people into higher rate tax bands, official statistics have shown.
Data from HM Revenue & Customs found 40.8 million people are projected to be paying income tax in 2026/27, up from 36.7 million in 2023/24, with basic-rate taxpayers estimated to make up around 76.9% of the overall income tax paying population.
However, HMRC said the number of higher-rate taxpayers is projected to reach 7.7 million in the 2026/27 tax year, an increase of 33.8% compared to 2023/24. This cohort is expected to make up 18.9% of overall income taxpayers.
Furthermore, the number of additional-rate taxpayers is expected to increase by more than 44% to 1.29 million in 2026/27.
The sharp jump in figures is driven by a combination of frozen allowances and high-wage growth.
Jason Hollands, managing director of Evelyn Partners, said: “These statistics lay bare the growing impact of fiscal drag, as frozen income tax thresholds continue to pull millions more people into paying income tax and into higher tax bands.
“Freezing tax thresholds has been an especially effective way of driving tax revenues in years where earnings inflation has been significantly higher than it was before the pandemic.
“With nine million people now paying either higher or additional-rate income tax, earners might want to consider if they can keep more of their gross pay. There are perfectly legitimate steps people can take to improve their tax efficiency and avoid paying more tax than necessary.”
Laura Suter, director of personal finance at AJ Bell, said: “There’s one winner from this rising tax tide: the Government, as it rakes in more tax from the nation. This year alone it’s expected the nation will pay £347 billion in tax – a cool £121 billion more than the last time tax thresholds increased in 2021/22. Even in the past year alone, it’s expected that the Government will take in an extra £18 billion in income tax.
“This highlights the conundrum for the incoming Prime Minister, Andy Burnham. While the frozen tax bands are squeezing the nation’s pay packets until the pips squeak, they are a very lucrative source of income for the Government – one it can ill afford to lose.”
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