Income‑Tax Pay‑Ups: The Numbers Are Spiking and Fast
HMRC just dropped a fresh set of figures that show the tally of income‑tax payers has been swelling like a balloon at a wedding. The jump isn’t subtle—it’s a 13.3 % rise across the board, and the higher end of the tax curve is dancing to a wilder beat.
Key Take‑aways (in plain English)
- Overall payers: up from 33.0 mil in 2021/22 to 37.4 mil in 2024/25.
- Basic & saver rate: 6.8 % climb to 29.9 mil.
- Higher rate: leap of 42.6 % to 6.3 mil.
- Additional rate: a staggering 117.1 % jump to 1.13 mil.
- Top 50 % of earners: still grill 90.8 % of the tax pot (down a smidge to 90.5 % by 2024/25).
- Top 1 %: cut from 30.7 % of total tax in 2021/22 to a projected 28.2 % in 2024/25.
What’s Really Happening?
The headline here is “tax bands stuck in a time‑warp.” With inflation at a feverish pace and the thresholds for higher and top rates held still, more folks are sliding into those steeper brackets—without a real lift in their purchasing power. Imagine your salary growing only enough to match the price surge, yet the tax office gets a bigger slice of what you take home.
Nicely put by Nicholas Hyett, Investment Manager at Wealth Club:
“The combo of high inflation and frozen tax bands is pulling more and more people into paying income tax. It’s especially noticeable at the top of the tax curve—think of the additional rate figures, which have more than doubled in three years. Workers who’re not actually wealthier in real terms are seeing a harsher cut thanks to these stealthy tax hikes. The politicians love it because it’s not a headline‑shattering tax rise on day one, but it creeps up to a big bump over time.”
Hyett continues, “If you’re taking on a bit more risk, Venture Capital Trusts or EIS‑qualifying investments could give you up to 30 % tax relief. But remember: they’re long‑term, risky bets, and you better be comfortable rolling the cash in.”
How to Keep Your Wallet a Bit Happier
- Put it in a pension: Contributions go tax‑free in the first place, and you’re building a nest egg.
- Consider a VC Trust or EIS: Potential for 30 % tax relief and a chance for tax‑free returns, if you can stomach the risk.
- Keep an eye on tax‑free allowances: Turbo‑charge your savings before the bands tangle up.
Bottom line
Expect the fiscal drag to keep dragging… even if politics don’t thaw those frozen bands. So, stay savvy, plan ahead, and maybe laugh at the irony of it all—because if taxes are so persistent, maybe the good news is that your saving strategies can be just as stubbornly bright.
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