UK Higher and Additional Rate Taxpayers Rise Sharply

New HM Revenue and Customs data shows a sharp rise in the number of UK higher and additional rate income taxpayers for the 2023-24 tax year, driven by frozen thresholds and wage growth pulling more earners into elevated bands.

The number of additional rate taxpayers, who pay 45 percent on income above £125,141, increased by 324,000, or 56.8 percent, to 893,000. Higher rate taxpayers, facing 40 percent on earnings over £50,271, grew by 654,000, or 12.8 percent, to 5.76 million. Basic rate taxpayers, at 20 percent above the £12,570 personal allowance, rose by 1.15 million to 29.4 million. Overall, the total number of income taxpayers climbed 2.17 million, or 6.3 percent.

HMRC attributed the increases primarily to unchanged thresholds since 2021-22 combined with rising incomes, mostly from employment. The additional rate threshold was lowered from £150,000 to £125,141 in April 2023. Successive governments have frozen these levels: initially until 2028 under the prior administration, then extended by Chancellor Rachel Reeves to April 2031.

This phenomenon, known as fiscal drag, occurs as inflation-adjusted pay pushes more income into taxable higher bands without rate changes....