Two million more people pay higher rates of tax

According to HM Revenue and Customs, there are nearly two million additional higher-rate taxpayers in the UK.

Two million more people pay higher rates of tax

According to HM Revenue and Customs, there are nearly two million additional higher-rate taxpayers in the UK.

Since 2019, the number of taxpayers who pay 40% or 45% tax has increased from 4.25m workers to more than 6.9m, figures show.

This is because prices are rising at an unprecedented rate in 40 years, and unions and workers push for wage increases to keep up.

Although the Treasury was urged to review tax brackets, it stated that most tax payers still paid basic rates.

From April 2021 Budget to 2026, the personal allowance (the amount that a worker can earn before they have to pay income tax) was frozen along with all thresholds.

Governments increase personal allowances every year so that people can receive a raise that is comparable to the rising cost-of-living without being dragged into the next bracket of tax.

However, inflation stands at 9.1% right now and is expected to rise. This means that pay increases will lead to more people paying higher taxes and more money for Treasury.

The Office for Budget Responsibility (government's independent watchdog) estimated that the government's tax intake in relation to the economy would reach its highest level since the 1940s at the time of March's spring statement.

After record borrowing levels during the pandemic, the Treasury stated that it made "tough but responsible" decisions to "avoid saddle future generations with more debt".

"Maintaining income taxes thresholds is progressive." "The vast majority of taxpayers will continue to pay the basic rate, and the UK has the highest personal allowance in G20," said the spokesperson.

Sir Steve Webb, former Liberal Democrat Pensions Minister, stated that higher rates of tax were "used to be reserved only for the very wealthy".

However, this has changed "very drastically" in the last few years, according to LCP's partner.

He stated that people who don't consider themselves to be particularly wealthy can now easily pay an income tax rate as high as 40%. Around 1 in 5 taxpayers will soon fall into the higher bracket.

Paying 40% more than the lower rate taxpayers earn PS50,271 in England and Wales. For those who earn PS43,663 and above in Scotland, the rate is 41%

The personal allowance covers the first PS12570 of the earnings that are subject to tax.

According to HMRC, they represent 16.2% of the total income tax-paying population by 2022-2023.

It said that additional rate taxpayers with incomes above PS150,000 who pay 45% tax are around 1.9%.

Clive Gawthorpe is a partner at UHY Hacker Young and said that the government should "urgently" review these tax brackets.

He said that inflation meant that taxpayers who fell into the higher bracket were already being forced to stretch their monthly paychecks further, without having to pay more tax.

Boris Johnson, Prime Minister of the United Kingdom, however, spoke out Thursday in defense of the government's tax policy. He cited plans to increase the threshold for National Insurance payments in July.

"We've got a tax reduction of PS330 per month next month... for all National Insurance contributors coming in, this is a substantial tax cut, in addition to the fuel duty and council tax cuts.

He said, "Officially, we always want burden reductions to be reduced, but we must do so in a sensible, responsible manner."

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