Figures published by HMRC this week show that changes to tax thresholds implemented in last month’s budget mean that a million more people will end up paying higher rate tax in this financial year, with over 300,000 now paying the 50pc maximum rate.
Reductions to the threshold for paying 40 per cent tax, as well as ‘fiscal drag’, where tax bands are not moved in line with inflation, and wage increases which are push more people into paying higher rate tax.
Despite this, the total number of UK taxpayers this year is set to fall by 400,000 as more of the lowest paid are taken out of tax altogether, thanks to increases in the personal allowance each person is entitled to before tax kicks in. Both of these factors have combined to bring the number of basic rate taxpayers down from last year’s historic high of 27.1 million to 24.8 million in the current financial year.
A Treasury spokesman stated that that the higher rate tax threshold had not changed: “Increasing the personal allowance has not created any new higher rate tax payers, although there will be some whose income increases over two years, moving them into the higher rate”.
The 50 per cent tax rate was introduced in 2010 to boost the economy during the recession and has since proved controversial. Chancellor George Osborne announced that it would be reduced to 45p as of April 2013, arguing that many of the country’s highest earners use other means to pay very low taxes.
Treasury Secretary David Gauke said that the latest set of tax changes would result in those earning more than £150,000 paying an extra £1300 annually in tax..