- 4.4 million more people will be dragged into paying income tax in the current tax year
- Number of additional rate taxpayers to top 1 million for the first time
- 1.77 million more taxpayers over the state pension age since tax bands were frozen
- Total income tax on earnings is £63.2bn more than 2021/22 when thresholds were put in the deep freeze
Laura Suter, director of personal finance at AJ Bell, comments on the latest figures on the government’s income tax take:
“These latest figures lay bare the real impact of freezing income tax bands during a period of high inflation and wage growth. The data estimates that since thresholds were frozen in the 2021/22 tax year 4.4 million more people will be dragged into paying income tax in the current tax year as people’s earnings have exceeded the frozen personal allowance of £12,570.
“There has also been a dramatic shift in the number of people paying higher rate tax, with almost 1.9 million more people expected to be dragged into the 40% tax bracket by this tax year when compared to 2021/22. In the current tax year alone it’s estimated that another 310,000 people will be pulled into paying higher rate tax.
“The impact of the additional rate tax threshold being lowered during a period of soaring wage growth means that it’s estimated that for the first time more than 1 million people will pay additional rate tax this year. An extra 180,000 people are expected to breach the £125,140 limit for additional rate tax this year alone. This will take the total number of additional rate taxpayers to 1.13 million for the current tax year – a whopping 117% increase since 2021.
“It’s not just working age people who have faced this rising tax tide, pensioners are being hit too. The frozen tax bands combined with chunky increases in the state pension mean that more pensioners are becoming taxpayers for the first time. It’s been a key election topic, with the Tories pledging a ‘triple-lock plus’ to help pensioners and accusing Labour of failing to shield the state pension from income tax. But for the current tax year we’re expected to see an extra 660,000 people over state pension age pulled into paying tax. Since tax bands were frozen in 2021 there will be 1.77 million more taxpayers over the state pension age – a 26% increase.
“All of this adds up to a huge jump in the tax take from the government. By the end of this year tax year it is expected that the government will take £272.6 billion in tax on earnings, a £16.3 billion increase on the previous year – and a whopping £63.2 billion more than in 2021/22.
“As we head toward the general election the Tories are pointing at Labour and insisting they will increase taxes if elected. But it is clear the Tories have also overseen a period in which more taxpayers are paying more tax too. From 2010 to the current tax year there have been huge increases in the number of taxpayers at all levels. During that period there are expected to be 6.1 million more taxpayers, 3.3 million more higher-rate taxpayers and almost 900,000 more additional rate taxpayers.”
