The latest data from HM Revenue and Customs has revealed a rise in the number of people paying 40% income tax.
If you are tax planning in Cheshire, the nationwide figures show that more than 7 million people are now paying the top rate for the 2025-26 tax year – an increase of 500,000.
Income tax thresholds previously rose in line with inflation but have remained locked at the same level since 2021, as set by the previous government. Over this period, the number of pensioners paying income tax has increased by nearly 2 million.
The tax threshold freeze has, consequently, seen some people caught in ‘fiscal drag’ higher tax brackets, as wages and pensions rose to meet the impact of inflation.
The personal allowance threshold is currently set at £12,570, below which no income tax is paid. Official data indicates that approximately 39.1 million people earn above that figure. With the state pension now standing at £11,973 per annum, an estimated 8.7 million people of pensionable age are predicted to be paying income tax in 2025-26.
According to personal finance expert, Laura Suter, everyone earning above the personal allowance limit could be caught by frozen tax thresholds, but those shunted into higher tax bands may feel it more. In most of the UK, people who cross the £50,270 threshold will see a 40p deduction, meaning people in the top bracket, who weren’t previously classed as high earners, now make up nearly 20% of all taxpayers.
