Five things to do once you cross the higher-rate 40p earnings threshold

Like it or not, the freeze on income tax thresholds at £50,270 means you could be among the 3m who find themselves in the higher 40pc bracket by 2028-29.

Telegraph Money explains how much more you could be paying, the steps you should take when you move up – and what you can do to save serious sums.

1. The reduced savings allowance

You will see the personal savings allowance cut in half to £500, which means that only the first £500 of your savings interest is tax-free and interest earned beyond that is subject to 40pc tax.

Consider reallocating funds to taxefficient accounts, such as Isas. With a generous annual limit of £20,000 per tax year, you can save or invest without having to worry about income tax, capital gains tax or dividend tax.

2. Plan for higher capital gains tax

The annual exempt amount, cut from £12,300 to £6,000, is to fall again from the start of the new tax year to £3,000.

Strategically planning the sale of assets to utilise the annual exemption, and possibly spreading gains over multiple tax years, can be beneficial in reducing your liability. Maximising your Isa allowance remains an excellent way of mitigating CGT for investments.

3. Higher dividend rates

The dividend tax allowance is currently £1,000, but is about to drop again to £500 in the next tax year. Any income from dividends is taxed at 33.75pc for higher-rate taxpayers. This compares to just 8.75pc for basic-rate taxpayers. Sheltering dividend- paying investments in Isas and pensions is vital.

4. Repay child benefit

The “child benefit high income charge” means you lose 1pc of your child benefit payments for every £100 you earn over £50,000.

Tell HMRC as soon as you realise you will face the high income charge. The higher earner in the couple will be responsible for paying the tax charge, or can choose to opt out.

5. Cancel marriage allowance

If HMRC is not notified that this has been cancelled, it would generate an underpayment of tax for the recipient.