Over 300,000 extra taxpayers hit with 45% income tax after additional rate threshold cut – London Business News | London Wallet

More than 55% more people are expected to pay additional rate tax band in 2023-24.
Since tax bands were frozen there has been a 142% increase in the number of additional rate payers.
More than eight million pensioners now paying income tax – a rise of one million since tax bands were frozen.

Since the Tories came to power there’s been a near four-fold increase in the number of additional rate taxpayers

Laura Suter, head of personal finance at AJ Bell, comments on the latest figures on the government’s income tax take: “The number of people hitting the highest rate of income tax has soared in the past year, with 55% more people expected to fall into the additional rate tax band in the current tax year. Government figures lay bare the real impact of the lowering of the additional rate income tax band from £150,000 to £125,140 at a time when wages are growing fast – with the number of additional rate taxpayers hitting 862,000, the highest ever.

“Since tax bands were frozen in 2021 there has been a 142% increase in the number of individuals paying income tax at the 45% rate, with an extra 373,000 people being pushed into paying the highest rate of tax on their income. But if we look back to when the Conservatives first came to power, during the coalition government in 2010, we’ve seen a near four-fold increase in the number of additional rate taxpayers, rising from 236,000 up to 862,000.

“The impact on higher rate taxpayers has been more muted but still significant. This year the number of higher-rate payers is expected to hit its highest ever, with 5.6 million people paying tax at 40%. This represents a 29% increase since tax bands were frozen in 2021, showing the extent to which the stealth tax has hit people’s pockets. Current high inflation rates mean more people are getting significant pay rises to try to keep pace with rising prices. But with income tax bands frozen it means many are being pushed into the next tax bracket.

“It’s not just working age people who have faced this rising tax tide, pensioners are being hit too. The number of people over state pension age who are paying tax has hit more than eight million for the first time ever. There has been a 10% increase in the number of people over the age of 66 who are paying income tax. Soaring inflation meant that the State Pension increased by 10.1% in April taking the full flat-rate state pension to £10,600 a year. However, with the Personal Allowance having been frozen at £12,570 it means that the state pension is taking up the lion’s share of that tax-free allowance.

“If we look over the longer term, there are now two million more pensioners paying income tax than there were when the Tories came to power in 2010. But one million of those have been dragged into the income tax net in the past two years alone, thanks to frozen tax bands.”