UK Taxpayers Being Dragged into Top Tax Brackets
July 24, 2014 Taxation in UK
LONDON – Within 20 years time nearly 10 million individuals in the UK will fall in the country’s highest tax brackets, as incomes rise over time.
According to new analysis released by the UK Office of Budgetary Responsibility on July 22nd, if the current personal tax brackets in the UK are not amended approximately one third of taxpayers in the country will be forced to pay the highest marginal tax rate within two decades.
Currently 4.6 million individual taxpayers in the UK earn incomes high enough to qualify for the 40 percent tax threshold, while an additional 300 000 pay the highest rate of 45 percent.
However, as incomes rise in line with inflation a higher number of people are getting dragged into the top rates, even though they are not considered “wealthy”, by the year 2033, approximately 9.2 million people will fall into 40 percent rate, while 1.7 million will be paying the 45 percent income tax rate.
The increase in the number of taxpayers paying the highest tax rates will be double the current level, and approximately one third of all working age taxpayers.
If the thresholds for the income tax brackets were raised in line with earnings growth, instead of the consumer price index, the number of people paying the top two tax brackets would rise by only 6.3 million.
Photo By: Phalinn Ooi