29 April 2026
If you are covering the latest personal income statistics, please see the following comment from Rachael Griffin, tax and financial planning expert at Quilter:
These figures show how frozen tax thresholds are completely reshaping the tax profile of the British public. In 2023/24 alone, an additional 2.17 million people were dragged into paying income tax, underlining the scale of fiscal drag now embedded in the system. Given we are not set to see any changes to thresholds until 2031, these dynamics look set to intensify rather than unwind over the coming years.
In a single year, the number of higher‑rate taxpayers rose by 654,000, an increase of 12.8%, taking the total to 5.76 million. At the same time, the number paying the additional rate surged by 324,000, a rise of almost 57%. While this period did see fairly large increases in pay, much of this was simply to keep pace with high inflation. When combined with frozen thresholds, it has left many taxpayers facing materially higher tax bills with little to no improvement in their standard of living.
This shift is no longer confined to traditionally high‑paid professions. Experienced teachers, senior nurses and police officers are increasingly being pulled into higher‑rate tax through incremental pay rises, overtime or progression, rather than genuinely high earnings. What was once a marginal issue is now becoming a mainstream experience across large parts of the workforce.
As a result, one in five taxpayers now earns over £50,000, yet higher‑rate taxpayers account for more than 70% of all income tax receipts. That concentration highlights just how reliant government finances have become on pulling more people into higher tax bands rather than on underlying growth in real incomes.
Pensioners are also not immune from this effect. There were 8.16 million taxpayers of pension age in 2023/24, up by more than one million in a single year, meaning around 22% of all taxpayers are now over state pension age. Around one million pensioners were dragged into paying income tax in that year alone. While part of this increase reflects demographic change as the pension‑age population grows, rising retirement incomes combined with frozen allowances are clearly playing a major role.
The triple lock has been vital in protecting pensioner incomes during a period of high inflation, but its interaction with frozen personal allowances is creating unintended consequences. In practice, state pension increases designed to preserve living standards are increasingly being clawed back through tax, particularly where even modest private pension income is involved.
For those still working, pensions remain one of the most effective ways to manage taxable income, but that landscape is changing. From 6 April 2029, the government will cap National Insurance exemptions on salary sacrifice pension contributions at £2,000 per year. Contributions above this level will attract both employer and employee NICs. While income tax relief remains unchanged, this represents a meaningful erosion of what has traditionally been one of the most effective tools for managing tax liabilities.
Higher interest rates have also significantly boosted the government’s take from savings tax. Taxable savings interest more than tripled as rates rose, catching millions of savers off guard. While rates have edged down and are unlikely to return to their recent peaks, the episode has reinforced the importance of using ISAs to shelter savings from income tax. For those with a longer‑term horizon, it may also prompt a rethink about relying too heavily on cash returns that may already be past their high point.
