Hundreds of thousands of taxpayers in the UK will be around £1,200 worse off next year, under new tax hikes for higher earners.
As part of the Autumn Statement, Chancellor Jeremy Hunt confirmed he will freeze the income tax personal allowance at £12,570 until April 2028. This means anyone earning this amount or lower will not have to pay tax on their incomes.
He has also frozen the basic rate until 2028, meaning anyone earning between £12,571 to £50,270 a year will continue to pay income tax at a rate of 20% of what they earn after the first £12,570.
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Currently, those on the higher rate band (earning £50,271 to £150,000) a year will pay 40% income tax. However, the bands are being moved. As of April 2023, the higher rate will only include those earning up to and including £125,140.
This means anyone earning over this will be placed in the "additional rate" band. At the moment, this is only for people earning more than £150,000. Earners in this band pay 45% tax on their incomes.
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown told the ECHO people in this band will pay an average of £1,200 more tax next year.
Ms Coles said: “The cut in the higher rate threshold from £150,000 to £125,140 is not a massive money-spinner. It’s likely to have more significance as a signal by the government that higher earners will bear some of the burden of filling the black hole in the government’s finances.
"However, those affected by the move, it’s more than just symbolic, because additional rate taxpayers will pay an average of £1,200 more.
Those on higher wages tend to have more wiggle room in their budgets, but rising prices have already created an awful lot of headaches for top earners. Those with big mortgages may well be feeling the pain from higher mortgage rates too, so this additional tax blow is likely to squeeze their incomes harder.”
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