As fiscal drag continues to affect higher earners, new figures show how long-term frozen threshold are quietly pushing more people into the UK’s highest tax band.
Featured in the Financial Times, Bowmore Financial Planning’s analysis revealed how frozen income tax thresholds have pushed hundreds of thousands of earners into the 45% tax band.
A Freedom of Information request found that 720,000 people earning between £125,140 and £211,562 paid the additional rate of income tax in 2024-25. Had the threshold kept pace with the inflation, most would have remained outside that band.
John Clamp, Chartered Financial Planner at Bowmore, told the Financial Times, “The way that this stealth tax has operated for 12 years means more and more people are being dragged into paying the highest rate of tax. When the 45 per cent rate was introduced, it was meant for those on what were then the very highest salaries — the equivalent of over £210,000 today.”
Many now paying the additional rate are seeing the marginal earnings from bonuses or promotions absorbed by tax. Some are even holding back from further progression as a result.
John continued, “If extra work barely boosts take-home pay because of frozen tax bands, people are less inclined to work longer hours or push themselves — and that ultimately drags on the economy.”
For high earners, careful planning is now essential. While tax thresholds remain frozen, there are still opportunities to structure income efficiently, protect allowances, and take a longer-term view of wealth preservation.
Financial Times: More than 1million paid highest rate of tax last year due to frozen thresholds.
Bowmore Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority.
The tax treatment of certain products depends on the individual circumstances of each client and may be subject to change in the future.
Bowmore Financial Planning Ltd is not regulated to provide tax advice.