HMRC has confirmed that over half a million additional households have been pulled into the 40% higher rate tax bracket, attributing the rise to the Labour government's policy of keeping tax thresholds unchanged. According to official data, 5.76 million people fell into the higher-rate bracket during the 2023/24 tax year, a significant increase from 3.83 million in 2019/20.
Steady Rise in Higher Rate Taxpayers
The figures represent a 50% increase over four years, with 654,000 more people entering the bracket in just 12 months from 2022/23 to 2023/24 — a 13% annual rise. HMRC stated that this shift is due to "the unchanged higher rate threshold and increases in income, largely from employment, resulting in more taxpayers being brought into the higher rate of tax."
Frozen Thresholds Until 2030
Chancellor Rachel Reeves confirmed at the November 2025 Budget that the frozen thresholds will remain in place until 2030/31, suggesting the trend will continue. Olly Cheng, financial planning divisional lead at Rathbones, warned: "Frozen thresholds are quietly pulling more people into higher tax bands, meaning more households will pay more tax, often without realising it."
Commentators have been cautioning about the damaging effects of fiscal drag since the personal income tax thresholds were frozen three years ago. Mr Cheng added: "The danger is people don't feel the squeeze until the year is already underway, which is why it's so important to take stock before and after the new tax year to get finances in the best possible shape."
When wages rise but tax thresholds remain static, more individuals are drawn into higher tax bands — a phenomenon known as fiscal drag, often referred to as a 'stealth tax'. The latest HMRC data underscores the substantial impact this has had on household finances.
