Nearly one million people are being pulled into higher tax bands as the government’s freeze on thresholds continues to take effect, new analysis shows.
Research by the Taxpayers’ Alliance has found that fiscal drag will impact one million Britons this year alone, as wage growth pushes workers across frozen tax boundaries.
Around 500,000 more people will pay the basic rate of tax, set at 20 per cent on earnings between £12,571 and £50,270 this financial year.
A further 410,000 more people will fall into the higher rate band of 40 per cent on income up to £125,140, while another 70,000 will be caught by the 45 per cent additional rate.
The Taxpayers’ Alliance warned that the number of people paying the additional rate has multiplied by five times in recent years, reflecting the scale of fiscal drag.
Higher and additional rate taxpayers together now account for 72.9 per cent of all income tax revenue collected by the government, underscoring how concentrated the burden has become.
On average, Britons will pay £640 more in income tax this year compared to the financial year ending in 2025, and £1,040 more than they paid in 2024.
London and the South East account for more than a quarter of all higher and additional rate taxpayers, compared to just 14.4 per cent in the North East of England.
The freeze on personal tax thresholds is set to continue until April 2031 after former Chancellor Rachel Reeves extended the policy to increase fiscal headroom and fund further welfare spending.
Prime Minister Andy Burnham has signalled he wants to address the tax burden on British workers, doubling down on suggestions he would revise the £12,571 personal allowance following pressure on the doorstep during his by-election campaign in Makerfield.
His spokesman insisted that no plans for a tax cut were being drawn up this year, though Burnham said on Wednesday morning that he would “look at that at the Budget.”
He told broadcasters that he preferred to answer questions about tax cuts “honestly without then people reading everything else into it,” though investors may grow uneasy about any potential unfunded commitments.
Independent economist Julian Jessop said tax hikes at the Budget this year were “pretty much guaranteed” given pledges on defence spending, cutting VAT on energy bills, tackling rough sleeping, and higher pay for junior doctors.
Shadow Chancellor Sir Mel Stride said Burnham was “rapidly heading towards” raising taxes further, even after Reeves raised £65bn in government revenue across her two Budgets.
Stride said: “His announcements so far just don’t add up. He’s not taking the hard choices because Labour MPs won’t get on top of welfare spending. That means borrowing will increase and taxes will rise.”