More taxpayers being pulled into higher tax brackets as high earner incomes up 22% since tax freeze

Vast amounts of UK taxpayers are paying more income tax due to successive governments failing to increase tax in line with inflation.

That’s the findings from the latest analysis from finance specialists, RIFT, who analysed both its own internal data, and the latest government figures, to reveal how many UK taxpayers have been pulled into the higher rate band since income tax thresholds were frozen in 2021/22..

As it stands, when annual earnings exceed £50,271 taxpayers are subject to a ‘higher rate’ of tax, set at 40%. This threshold has been frozen in place since April 2021 and, as a result, has seen rising numbers pushed into the higher tax band as inflation takes effect.

The analysis from RIFT shows that there’s been a 42% increase in the number of taxpayers caught in the higher rate tax band from the 2021-22 tax year when the freeze was first implemented until now (2024/25) to 2024-25. As a result, the number of higher rate taxpayers has increased from 4.43 million to 6.31 million during this timeframe.

This increase has been driven by consistent wage growth, with further analysis from RIFT showing that in 2021/22, the average estimated salary for a high earner sat at £50,201, just below the higher tax rate threshold.

Since then, the average income of a high earner has climbed by 22% to £61,041 in 2024/25 and is expected to increase to £63,299 in 2025/26.

As a result of this fiscal drag, the average high earner will see the amount of income subject to the higher rate of tax climb to £13,029 – equating to 21% of their total income, a figure that has climbed consistently since the freeze was implemented.

Internal data from RIFT further supports the firm’s analysis of the latest government data. Of those utilising RIFT’s expertise in order to secure a tax refund for the 2024/25 tax year, 79% earnt within the basic rate of tax, with this figure having fallen by 8% since 2021/22.

In contrast, 18% fell within the higher rate of tax, with this figure having increased by 9% since income tax thresholds were frozen.

The Labour Party has committed to freezing income tax bands until April 2028, up from the previous timespan of April 2026.

This means that, while the party hasn’t technically increased income taxes, they will increase by stealth for the next three years.

Bradley Post, MD of RIFT, said,“Rising income taxes have been particularly punitive in recent years, as inflation reached double digits between September 2022 and March 2023.

“With this in mind, it’s no surprise that over 42% more people have been pulled into the higher rate band since 2021 and we’ve also observed internally how the freeze on income tax thresholds has pulled more people into the higher rate, who would have previously been subject to the basic rate of tax.

“With Labour pledging to freeze income tax bands until April 2028, many more are set to feel the pinch in the years ahead and it’s not just the tax they owe that can cause them financial hardship.

Being pulled into the higher rate of tax can also cause them to lose out on other areas of financial support, with one of the most common we see being their right to claim child benefits.

As it stands, a combined house income where both parents earn below the higher rate, even if it’s only marginally below, would see them eligible to claim child benefits. However, if one parent doesn’t work at all, but the income of the other creeps into the higher rate, this would see their right to child benefits stopped.”