London Daily

Focus on the big picture.
Wednesday, Oct 22, 2025

'A seismic shift': One in five taxpayers face 40% rate by 2027 - with these professions hard hit

'A seismic shift': One in five taxpayers face 40% rate by 2027 - with these professions hard hit

In 1991/92, 3.5% of UK adults (1.6 million) paid the 40% higher rate of income tax - but by 2022/23, the number had increased to 6.1 million or 11%.
One in five taxpayers will be paying higher-rate income tax by 2027, in what the Institute for Fiscal Studies describes as a "seismic shift" since the 1990s.

Higher rates of tax were previously thought of as being for the most wealthy, but the six-year freeze in income tax allowances and thresholds that began last month will mean more lower earners are included.

The process is called fiscal drag, and it happens when inflation or income growth moves a taxpayer into a higher tax bracket - increasing tax revenue without the government having to actually raise rates.

The IFS said that by the 2027/28 financial year, more than one in eight nurses, one in six machinists and fitters, one in five electricians and one in four teachers will become higher-rate taxpayers. Almost half of surveyors and legal professionals will also be paying higher rate tax.

Isaac Delestre, a research economist at the IFS, said: "For income tax, the story of the last 30 years has been one of higher-rate tax going from being something reserved for only the very richest, to something that a much larger proportion of adults can expect to encounter."

Mr Delestre said: "Whether or not the scope of these higher rates should be expanded is a political choice as much as an economic one, but achieving it with a freeze leaves the income tax system hostage to the vagaries of inflation - the higher inflation turns out to be, the bigger impact the freeze will have."

In 1991/92, 3.5% of UK adults (1.6 million) paid the 40% higher rate of income tax. By 2022/23, 11% (6.1 million) were paying higher rates, the report said.

The standard personal allowance - the amount someone does not have to pay tax on - is £12,570. Above that amount, a person pays 20% tax until they hit an income of £50,271, when the 40% rate kicks in.

But for the 40% rate to impact the same fraction of people as it did in 1991, the higher rate threshold would need to kick in at nearly £100,000 in 2027/28, the report said.

Scotland's tax bands are different, and the IFS said that it included both those paying the Scottish higher tax rate at 42% and the Scottish top rate at 47% as well as those paying the higher rate of 40% or additional rate of 45% elsewhere in the UK.

A Treasury spokesperson said: "After borrowing hundreds of billions to support the economy during the pandemic and Putin's energy shock, we had to take some difficult decisions to repair the public finances and get debt falling.

"It is vital we stick to this plan to halve inflation this year and get our economy growing again.

"To support working families, we have doubled the tax-free personal allowance, taking three million of the lowest earners out of paying income tax altogether."
Newsletter

Related Articles

0:00
0:00
Close
White House Announces No Imminent Summit Between Trump and Putin
US and Qatar Warn EU of Trade and Energy Risks from Tough Climate Regulation
Apple Challenges EU Digital Markets Act Crackdown in Landmark Court Battle
Nicolas Sarkozy begins five-year prison term at La Santé in Paris
Japan stocks surge to record as Sanae Takaichi becomes Prime Minister
This Is How the 'Heist of the Century' Was Carried Out at the Louvre in Seven Minutes: France Humiliated as Crown with 2,000 Diamonds Vanishes
China Warns UK of ‘Consequences’ After Delay to London Embassy Approval
France’s Wealthy Shift Billions to Luxembourg and Switzerland Amid Tax and Political Turmoil
"Sniper Position": Observation Post Targeting 'Air Force One' Found Before Trump’s Arrival in Florida
Shouting Match at the White House: 'Trump Cursed, Threw Maps, and Told Zelensky – "Putin Will Destroy You"'
Windows’ Own ‘Siri’ Has Arrived: You Can Now Talk to Your Computer
Thailand and Singapore Investigate Cambodian-Based Prince Group as U.S. and U.K. Sanctions Unfold
‘No Kings’ Protests Inflate Numbers — But History Shows Nations Collapse Without Strong Executive Power
Chinese Tech Giants Halt Stablecoin Launches After Beijing’s Regulatory Intervention
Manhattan Jury Holds BNP Paribas Liable for Enabling Sudanese Government Abuses
Trump Orders Immediate Release of Former Congressman George Santos After Commuting Prison Sentence
S&P Downgrades France’s Credit Rating, Citing Soaring Debt and Political Instability
Ofcom Rules BBC’s Gaza Documentary ‘Materially Misleading’ Over Narrator’s Hamas Ties
Diane Keaton’s Cause of Death Revealed as Pneumonia, Family Confirms
Former Lostprophets Frontman Ian Watkins Stabbed to Death in British Prison
"The Tsunami Is Coming, and It’s Massive": The World’s Richest Man Unveils a New AI Vision
Outsider, Heroine, Trailblazer: Diane Keaton Was Always a Little Strange — and Forever One of a Kind
Dramatic Development in the Death of 'Mango' Founder: Billionaire's Son Suspected of Murder
Two Years of Darkness: The Harrowing Testimonies of Israeli Hostages Emerging From Gaza Captivity
EU Moves to Use Frozen Russian Assets to Buy U.S. Weapons for Ukraine
Europe Emerges as the Biggest Casualty in U.S.-China Rare Earth Rivalry
HSBC Confronts Strategic Crossroads as NAB Seeks Only Retail Arm in Australia Exit
U.S. Chamber Sues Trump Over $100,000 H-1B Visa Fee
Shenzhen Expo Spotlights China’s Quantum Step in Semiconductor Self-Reliance
China Accelerates to the Forefront in Global Nuclear Fusion Race
Yachts, Private Jets, and a Picasso Painting: Exposed as 'One of the Largest Frauds in History'
Australia’s Wedgetail Spies Aid NATO Response as Russian MiGs Breach Estonian Airspace
McGowan Urges Chalmers to Cut Spending Over Tax Hike to Close $20 Billion Budget Gap
Victoria Orders Review of Transgender Prison Placement Amid Safety Concerns for Female Inmates
U.S. Treasury Mobilises New $20 Billion Debt Facility to Stabilise Argentina
French Business Leaders Decry Budget as Macron’s Pro-Enterprise Promise Undermined
Trump Claims Modi Pledged India Would End Russian Oil Imports Amid U.S. Tariff Pressure
Surging AI Startup Valuations Fuel Bubble Concerns Among Top Investors
Australian Punter Archie Wilson Tears Up During Nebraska Press Conference, Sparking Conversation on Male Vulnerability
Australia Confirms U.S. Access to Upgraded Submarine Shipyard Under AUKUS Deal
“Firepower” Promised for Ukraine as NATO Ministers Meet — But U.S. Tomahawks Remain Undecided
Brands Confront New Dilemma as Extremists Adopt Fashion Labels
The Sydney Sweeney and Jeans Storm: “The Outcome Surpassed Our Wildest Dreams”
Erika Kirk Delivers Moving Tribute at White House as Trump Awards Charlie Presidential Medal of Freedom
British Food Influencer ‘Big John’ Detained in Australia After Visa Dispute
ScamBodia: The Chinese Fraud Empire Shielded by Cambodia’s Ruling Elite
French PM Suspends Macron’s Pension Reform Until After 2027 in Bid to Stabilize Government
Orange, Bouygues and Free Make €17 Billion Bid for Drahi’s Altice France Telecom Assets
Dutch Government Seizes Chipmaker After U.S. Presses for Removal of Chinese CEO
Bessent Accuses China of Dragging Down Global Economy Amid New Trade Curbs
×