Millions more people are paying income tax with the total number surging to 35.5 million an increase of 4.5m since 2010, new research has revealed.
An additional 2.8million have been dragged into paying the top rates of income tax and 1.7 million more people are paying the basic rate.
Income tax thresholds were frozen in 2021/22 and since then the largest increases in new taxpayers are in Yorkshire and the Humber, Wales and the North East.In contrast, London saw the smallest percentage increase of people paying income tax since 2021/22, both in terms of the basic rate, the higher rate and the additional rate.
As chancellor, Rishi Sunak froze the tax-free income allowance at £12,570 in 2021-22 and set the higher rate at which earnings are taxed at 40% at £50,270.
The Bank of England’s inflation calculator shows that had these thresholds risen in line with prices they would now stand at around £15,000 and £60,000.
This year the chancellor Jeremy Hunt has imposed an additional rate of 45% on salaries and earnings above £125,141 instead of £150,000 last year.
Freezing the thresholds creates “fiscal drag”, hitting more workers with higher tax bills as the years go by.
Since thresholds were frozen in 2021/22, an additional 1.1 million are paying the basic rate of income tax and an additional 1 million are paying the higher rate.
Sarah Coles, Head of Personal Finance at stockbrokers Hargreaves Lansdown said: “When Rishi Sunak froze income tax thresholds for 2021-22, inflation was nowhere near what we went on to experience.
“As a result this policy produced much more revenue than expected with many more people becoming both basic and higher rate taxpayers.
“While fiscal drag has been a great cash cow for the government, it has not been done in a way that was designed or planned by anyone, it has just happened by accident.
“As a result, even if people are aware they are paying a higher rate of income tax they might not be aware that they are paying loads of other sorts of taxes that are linked to it as well.
“Higher rate taxpayers pay more tax on savings interest, more on capital gains tax and more tax on dividends from investments.
“There are lots of other rates attached to income tax that makes life even more expensive for people than it already is.
“This can be mitigated by using Isas, pension savings and tax-planning as a couple to make sure you are not paying more tax than you have to.”
Darwin Friend, research director of the TaxPayers’ Alliance which carried out the research, said: “Taxpayers in every corner of the United Kingdom are struggling with the bruising impact of tax rises and threshold freezes.
“The transformation of Britain into a high-tax, low-growth economy has hit almost every household, from Edinburgh to Eastleigh and Cardiff to Colchester.
“Ministers must use the budget to give taxpayers the income tax relief they desperately need.”
In 2014, the current foreign secretary Lord Cameron described lifting millions of people out of tax while prime minister as “one of the proudest things I have done in government.”
His coalition government lifted the personal allowance from £6,475 to £10,000 in a move that won universal support.
