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How 3.3m more workers have been pulled into paying higher rate of tax in past five years
Millions more UK workers are paying higher rates of income tax because income tax thresholds have been frozen since 2021, according to newly published government figures. The article says this has pulled many people into higher bands through “fiscal drag”, where wages rise but tax thresholds do not, meaning a larger share of earnings is taxed at higher rates. It matters because it increases the tax burden on ordinary earners while significantly boosting Treasury revenues without headline tax rate rises.
The number of higher-rate taxpayers is projected to rise from 4.43 million in 2021/22 to 7.7 million in 2026/27, an increase of 3.3 million, while additional-rate taxpayers are expected to increase from about 500,000 to 1.29 million. Over the same period, income tax receipts are forecast to climb from £226 billion to £347 billion, a £121 billion increase, and the number of basic-rate taxpayers is projected to grow from 27.4 million to 31.4 million. The higher-rate threshold remains at £50,270, while the additional-rate threshold was frozen at £150,000 before being reduced to £125,140 in 2023/24.
In short
- Frozen thresholds are pushing millions into higher tax bands
- Higher-rate taxpayers are projected to reach 7.7 million
- Income tax receipts are forecast to rise by £121 billion
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
The government maintains that freezing tax thresholds is a necessary measure to stabilise public finances and adequately fund essential services including the NHS and education. Supporters argue that when wages rise with inflation, it is reasonable that tax contributions rise proportionally, and that raising thresholds would simply divert vital resources away from public services that all citizens depend upon. They contend that in a constrained fiscal environment, this represents a fair and proportionate way to ensure sustainable government funding without cutting public provision.
The case against
Critics argue that freezing thresholds constitutes a stealth tax that raises burdens on working people without explicit democratic debate or consent. They contend that ordinary earners whose wages are rising merely with inflation—and not in real terms—should not find themselves in higher tax brackets, and that the government should make transparent policy choices rather than rely on mechanical fiscal drag. Many argue this approach disproportionately burdens those receiving pay increases whilst obscuring the true tax burden from voters, and that it risks dampening work incentives and economic productivity.
Explained simply
Income tax thresholds are the points at which you start paying higher rates of tax. The government has kept these thresholds frozen since 2021, so they have not risen with wages or inflation. As a result, millions more workers have found themselves paying tax at higher rates simply because their salaries have increased, even though the official tax rates have not changed.
When thresholds stay the same but salaries rise, a bigger share of earnings gets taxed at the higher rate. The government figures show the number of people paying the 40 per cent higher rate has jumped by 3.3 million since 2021, whilst those paying the top 45 per cent rate have nearly tripled. Over the same period, the Treasury has collected an extra £121 billion in income tax as a result.
The significance lies in how this affects ordinary workers' pay packets whilst quietly boosting government revenues. Workers end up paying substantially more tax without any change to official tax rates, because frozen thresholds automatically pull more of their earnings into higher tax bands. This effect has become one of the main ways the government has increased its tax take in recent years.