15 July 2026
If you’re covering the latest income tax statistics from HMRC, please see the following comment from Shaun Moore, tax and financial planning expert at Quilter:
"Fiscal drag has become the Treasury's bad habit. Every year frozen thresholds deliver another hit of painless revenue, but the longer governments rely on it, the harder it becomes to quit. The result is that tax bands originally aimed at high earners increasingly capture ordinary professionals, while ministers can raise billions without ever having to announce a tax rise. While thresholds are set to finally thaw in the 2030s, after a decade of the freeze, the government will be very used to huge boosts in revenue it creates.
"By 2026/27, HMRC expects 40.8 million people to be paying income tax, up from 36.7 million in 2023/24 and 33 million in 2021/22 when thresholds were first frozen. That means almost eight million more people, or a fifth of all taxpayers, have been dragged into paying tax in the years since. Much of this growth is occurring within the basic rate tax band, with the number of basic rate taxpayers projected to rise from 29.4 million to 31.4 million. However, what were once considered tax rates for wealthier people are increasingly reaching a much broader group. The number of higher rate taxpayers is projected to reach 7.7 million by 2026/27, while the number paying the additional rate is expected to jump to 1.29 million.
“While pay packets have grown in recent years, much of that increase has simply reflected higher inflation and living costs. The result is that people are paying more tax not necessarily because they have become significantly wealthier, but because frozen thresholds mean a greater proportion of their income is being captured by the tax system.
“The impact is also being felt among older generations. HMRC projects that 9.58 million taxpayers will be above state pension age by 2026/27, representing almost a quarter of all taxpayers. Rising state pension payments, combined with frozen allowances and private pension income, mean more retirees are finding themselves paying tax in retirement, with many being drawn into the tax system for the first time.
“The data also highlight the extent to which income remains concentrated among a relatively small group of earners. The top 10% of taxpayers account for around a third of all pre-tax income, while the top 1% account for more than 12%. As a result, the highest earners continue to shoulder a significant share of the income tax burden. However, the steady rise in higher and additional-rate taxpayers suggests the definition of what constitutes a higher earner is gradually shifting.
“The Treasury has become increasingly reliant on the revenues generated by frozen thresholds. What began as a temporary measure has evolved into one of the most effective revenue-raising tools available to government, but the burden falls squarely on the shoulders of UK taxpayers.”
