More than half a million taxpayers are now caught in a 60% tax trap, a figure that has increased by nearly a quarter over the past year due to frozen thresholds.

In the 2022/23 tax year, 537,000 taxpayers paid 60% tax on a portion of their income, a 23% increase from 436,000 the previous year. This situation arises from a flaw in the current income tax system, where individuals earning between £100,000 and £125,140 pay 60% tax on that segment of their earnings. The tax-free personal allowance of £12,570 is gradually reduced once annual earnings exceed £100,000.

High-earners falling into this tax trap have surged as inflation has driven up wages. Projections indicate that an additional 300,000 people will be drawn into the higher-rate tax bracket this year, with the total number of 40% tax rate earners reaching a record 4.4 million.

Furthermore, over one million people are now paying the 45% additional rate tax, with an extra 180,000 taxpayers expected to surpass the £125,140 threshold by year-end. The previous Government froze these thresholds until April 2028, and the current Labour Government has not intended to raise them during this parliament. As a result, more individuals are being impacted by these high tax rates, exacerbating the financial burden on UK taxpayers.

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