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Monday, August 15, 2022

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Two million extra folks paying increased price tax

Self Assessment Tax FormGetty Images

There are almost two million extra increased and extra price taxpayers within the UK, in response to HM Revenue and Customers (HMRC).

The variety of folks paying 40% or 45% tax has risen from 4.25m to greater than 6.1m employees since 2019, figures present.

It comes as costs rise on the quickest price for 40 years and employees and unions push for pay rises to manage.

The Treasury has been urged to re-examine tax brackets, but it surely mentioned most tax payers nonetheless paid the fundamental price.

It had taken “tough but responsible decisions” to “avoid saddling future generations with more debt” after report ranges of borrowing throughout the pandemic, it mentioned.

“Maintaining income tax thresholds is a progressive approach. The vast majority of taxpayers will still pay the basic rate and the UK still has the highest personal allowance in the G20,” the spokesperson added.

Countering this approach, former Liberal Democrat pensions minister Sir Steve Webb mentioned that “paying higher rate tax “was reserved for the very wealthiest”.

But this has modified “very dramatically” in recent years, added the partner at consultants LCP.

“People who wouldn’t consider themselves as being notably wealthy can now simply face an earnings tax price of 40% and round 1 in 5 of all taxpayers will quickly be within the increased price bracket,” he mentioned.

Higher rate taxpayers paying 40% earn £43,663 or over in Scotland and £50,271 in England, Northern Ireland and Wales. They do not pay tax on the first £12,570 of earnings covered by the personal allowance.

They represent a projected 16.2% of the overall income tax-paying population in 2022-2023, according to the HMRC.

Meanwhile, additional rate taxpayers who earn over £150,000 and pay at 45% tax make up around 1.9%, it said.

The number of higher rate taxpayers is expected to rise further because the tax threshold has been frozen by the government until 2026.

When income tax brackets do not move with inflation it is known as “fiscal drag”.

This causes more taxpayers to fall into higher tax brackets, increasing overall income tax payments and generating more money for the Treasury.

Clive Gawthorpe, partner at accountancy firm UHY Hacker Young said the government needs to “urgently” look at these tax brackets.

“Due to inflation, taxpayers sucked into the upper band had been already having to make their month-to-month pay checks stretch additional – with out the extra burden of upper tax,” he added.


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