Chancellor Jeremy Hunt has announced a significant increase in income tax by cutting the threshold for the highest rate of tax and freezing other thresholds.
Presenting the Autumn Statement to Parliament, Hunt (pictured) confirmed the additional rate tax threshold has been cut from £150,000 to £125,140.
The change to higher rate tax means more than 200,000 more people will be brought into the 45% bracket.
Other income tax thresholds will also be held for another two years until 2028 which will bring more people and earnings into scope as personal wage rises take effect.
The tax-free allowance for capital gains will also reduce in 2023–24 from £12,300 to 6,000 and again to 3,000 in 2024-25.
The changes will raise an extra £8bn in total, starting from £390m in 2023-24 up to £3.1bn in 2027-28.
Hargreaves Lansdown senior personal finance analyst Sarah Coles said the cut in the higher rate threshold from £150,000 to £125,140 was not a massive money-spinner.
“It’s likely to have more significance as a signal by the government that higher earners will bear some of the burden of filling the black hole in the government’s finances,” she said.
“However, those affected by the move, it’s more than just symbolic, because additional rate taxpayers will pay an average of £1,200 more.”
