Frozen Tax Thresholds Push Millions Into Higher Tax Brackets

Government policy on income tax thresholds has increased the tax burden for workers, pensioners, and savers, with projections suggesting further impacts in the coming years.

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.