Millions of UK households face paying 40 per cent tax under new bands. Seven million UK households will pay 40 per cent tax on some of their income between 2025 and 2026, figures show, as the Labour Party government continues to squeeze people.
This is some 2.5 million more than if the tax thresholds had never been frozen by former Conservative Party Prime Minister Rishi Sunak when he was Chancellor in 2021. Sarah Coles, of stockbroker Hargreaves Lansdown, said: “Gone are the days when being a higher-rate taxpayer was the preserve of the very wealthy – now around a fifth of taxpayers pay higher or additional rates.
“Between us, we’re paying billions more in tax than we did this time last year, and it’s only going to get worse, because those tax thresholds have been frozen until April 2028. It means the idea of generating a tax-free income has become even more attractive.”
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The Office for Budget Responsibility (OBR) predicts that seven million will pay 40 per cent tax in the coming tax year – 2.5 million or 55 per cent more compared to if income tax thresholds had never been frozen, they have said.
The watchdog forecasts that 3.5 million workers will start paying income tax in the 2025-26 tax year because of the freeze that began in 2021. Meanwhile, 2.5 million will be dragged into the higher tax band which applies to earnings over £50,270.
Rachel Reeves said in her first appearance in the House of Commons since her trip to China that she was committed to the fiscal rules she had set out in October 2024. She added: “We have set out the fiscal rules that we will balance day to day spending with tax receipts and we will get debt down as a share of GDP within the forecast period, and we will continue at all times to meet those fiscal rules.”
A spokesman for HM Treasury said: “We are committed to keeping taxes low for working people, which is why we protected payslips from tax rises and are not extending the freeze on personal tax thresholds past 2027-28.”