UK highest income tax rate payers surpass one million

The number of UK taxpayers paying the highest income tax rate has reached 1.14 million in the 2024-25 tax year, according to UHY Hacker Young.

It marks a 24% increase from the 923,000 recorded in the 2023-24 tax year.

The number of “additional rate” taxpayers, paying 45% tax, is expected to rise to 1.23 million this year.

During the past five years, the number of taxpayers paying the 45% rate has surged by 163%, rising from 433,000 in the 2020-21 tax year.

Neela Chauhan, partner at UHY Hacker Young, attributes this increase to “fiscal drag,” where inflation gradually moves more taxpayers into higher tax brackets, often referred to as a stealth tax.

People with earnings of more than £125,140 ($170,416) are required to pay the income tax at the additional rate of 45%.

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Chauhan said: “The sharp jump in the number of people having to pay the highest rate of tax is worrying as its not caused by people who are becoming genuinely wealthier. Rather it is due to the Chancellor deciding to freeze thresholds. Though it might seem equitable for higher earners to be paying more tax, there are real concerns over the impacts of placing an ever higher tax burden on high earners.

“Increasing the tax burden too high could push these individuals to leave the country or deter talented individuals from moving to this country. There are concerns that there is a ‘brain drain’ already taking place due to the Government’s non-doms policies.”

Recently, Donald Parbrook, a senior tax partner at Azets, called on Chancellor Rachel Reeves to reconsider proposals from the Office of Tax Simplification to address the UK’s complex tax system.

The aim is to enhance revenue without harming business confidence or deterring investment, with the Autumn 2025 Budget as a potential platform.

In response to economic changes, including trade uncertainties and fiscal tightening, the Chancellor is expected to propose significant tax reforms.

These may involve revisiting earlier adjustments to inheritance tax, pension rules, and National Insurance, as public finances remain under pressure and new revenue sources are sought.