There was a 142% improve within the variety of further price tax payers because the tax bands had been frozen in 2021, newest HMRC figures reveal.
Some 55% extra individuals at the moment are anticipated to pay the 45% further price tax band in 2023-24 in consequence.
In the meantime, greater than eight million pensioners at the moment are paying revenue tax – an increase of 1 million because the freezing of tax bands.
Laura Suter, head of private finance at AJ Bell, stated: “Since tax bands had been frozen in 2021 an additional 373,000 individuals have been pushed into paying the best price of tax on their revenue.
“But when we glance again to when the Conservatives first got here to energy, in the course of the Coalition authorities in 2010, we’ve seen a close to four-fold improve within the variety of further price taxpayers, rising from 236,000 as much as 862,000.”
This yr the variety of higher-rate payers is predicted to hit its highest ever, with 5.6m individuals paying tax at 40%. It represents a 29% improve since tax bands had been frozen in 2021.
Ms Suter stated: “It’s not simply working age individuals who have confronted this rising tax tide, pensioners are being hit too. There was a ten% improve within the variety of individuals over the age of 66 who’re paying revenue tax.
“If we glance over the long run, there at the moment are two million extra pensioners paying revenue tax than there have been when the Tories got here to energy in 2010. However a million of these have been dragged into the revenue tax internet up to now two years alone, because of frozen tax bands.”
The annual revenue tax statistics printed by HMRC confirmed:
• In 2023/24 the variety of over-65s paying revenue tax stood at 8.5m, a rise of 10% on the 2022/23 determine of seven.73m; the determine of 8.5m is strictly double the variety of taxpaying over-65s in 2004/05;
• The whole variety of taxpayers of all ages rose by 1.3m to 35.9m; barely extra girls (0.7m) than males (0.5m) had been dragged into the tax internet;
• Extra persons are paying tax at larger charges; the numbers paying the highest (45%) ‘further’ price soared from 555,000 to 862,000, whereas the numbers paying on the larger (40%) price rose from 5.28m to five.59m.
Former Pensions Minister Steve Webb, accomplice at LCP, stated: “The surge within the variety of pensioners paying revenue tax reveals that the coverage of freezing tax thresholds is de facto starting to chew. The variety of pensioners paying tax will proceed to extend quickly in years to return, notably if inflation stays comparatively excessive and thresholds proceed to be frozen.”
Sarah Coles, head of private finance at Hargreaves Lansdown, stated: “Again within the Nineteen Nineties, fewer than 5% of individuals paid larger price tax, whereas now it’s greater than 15%.
“It’s a very blunt instrument, counting on unpredictable inflation to do the work of deciding who pays tax and the way a lot – quite than making a particular determination about what’s honest and what is smart. It means loads of individuals who by no means thought they’d face this type of tax being landed with large tax payments.”