Overview

• Nearly six million additional taxpayers have been drawn into higher tax brackets due to the freeze on income tax thresholds since 2021, which is set to continue until 2028.
• The number of higher-rate taxpayers paying 40% tax rose by 680,000 to 5.1 million in 2022-23, while the number of additional-rate taxpayers paying 45% tax increased by 49,000 to 600,000.
• Pensioners, driven by the triple lock increase in state pensions, now represent a growing share of income tax contributors, with over 70s paying more in tax than those under 30 for the first time.
• Fiscal drag, where thresholds remain stagnant despite inflation and wage growth, has significantly boosted government revenues, with higher and additional rate taxpayers contributing nearly 69% of income tax collected.
• Chancellor Rachel Reeves is reportedly considering extending the freeze on thresholds further in her spring statement to address budgetary constraints, potentially impacting millions more taxpayers.