Nearly two million more on higher tax since 2019

Burden falling on millions of households during the cost of living crisis is ‘not right’, says think tank

NEARLY two million workers have been dragged into the higher rate income tax bracket since Boris Johnson’s election victory.

The number of workers paying 40 per cent or 45 per cent tax has risen from 4.25 million in 2019-20 to more than 6.1 million today, HM Revenue & Customs figures show.

The Treasury enforced a five-year freeze on tax thresholds before inflation rose, despite Mr Johnson saying before the December 2019 election that his aim was to increase the higher rate tax band to £80,000.

The Treasury has made billions of pounds in extra tax during the worst cost of living crisis in generations, thanks to the “fiscal drag” phenomenon, which is accelerated during times of high inflation and pulls workers into higher income tax brackets as their wages rise in line with price growth.

The threshold freeze is forecast to create a further million higher rate taxpayers by 2026, according to analysis from consultancy LCP.

It would mean a total of seven million workers paying at least the 40 per cent rate tax by the time of the next election – more than one in five of all taxpayers. Since the Conservatives returned to power in 2010, the number of higher rate taxpayers has nearly doubled from 3.2 million.

It comes as reports suggest No 10 has proposed a VAT cut to tackle inflation and ease the cost of living crisis. Steve Barclay, the Prime Minister’s chief of staff, suggested reducing the 20 per cent headline rate of the tax, The Times reports.

The figures emerged as Boris Johnson yesterday refused to commit to tax cuts this year, amid a stand-off with the Treasury on whether they are affordable.

The Prime Minister was asked during a press conference at the Nato summit in Madrid about when he will cut levies on hard-pressed families.

“We always want to try to reduce burdens but we have to do it in a sensible and a responsible way,” he replied.

He added that the Government has already announced cuts to National Insurance, council tax and fuel duty in two cost of living rescue packages.

Rishi Sunak, the Chancellor, is understood to be resisting calls from the Prime Minister to reverse the planned increase in corporation tax next year from 19 per cent to 25 per cent.

The pair are set to give a joint speech on the economy within the next fortnight, but it isn’t expected to contain any new announcements on tax.

The Prime Minister and Chancellor have faced criticism, including from their own MPS, for raising the tax burden and inflicting a new 1.25pc National Insurance levy during the worst cost of living crisis in four decades.

The Treasury’s income tax take has jumped by nearly a third in three years, rising to £251 billion from £189 billion by 2022-23. The higher rate tax threshold was £43,875 in 2010, and has since been raised to £50,270.

Robert Colvile, of the Centre for Policy Studies think tank, said the record high tax burden would cost millions of households during a time of “hideous” cost of living pressures.