Additional rate threshold lowered from £150,000 to £125,140

The additional rate threshold for income tax was lowered from £150,000 to £125,140 from April 2023, according to HMRC's Income Tax Liabilities Statistics bulletin¹. The same publication states that the threshold has been frozen at £125,140 from 2023 to 2024 onwards¹. The additional rate itself is 45%, alongside a basic rate of 20% and a higher rate of 40% for 2023-24².

The threshold had previously been £150,000 since the additional rate was introduced in 2010¹. HMRC says the reduction means "a greater number of individuals become liable for the additional rate" and explains an increase of 219,000 additional rate payers between 2023 to 2024 and 2024 to 2025, a rise of 0.4 percentage points¹.

Outturn data for 2023 to 2024, collected from the Survey of Personal Incomes, show 893,000 people (2.4% of income tax payers) paying the additional rate, alongside 29.4 million (80.1%) basic rate payers, 5.76 million (15.7%) higher rate payers and 652,000 (1.8%) savers rate payers¹. HMRC projects 1.29 million additional rate payers (3.2%) by 2026 to 2027, an increase of 44% from 2023 to 2024¹.

Source: HMRC, Income Tax Liabilities Statistics¹

HMRC attributes part of the projected rise in higher rate payers to the higher rate threshold being frozen from 2022 to 2023 through to 2030 to 2031 at its 2021 to 2022 level, with earnings growth pushing taxpayers into the higher range¹. It says the effect of that freeze is "slightly offset" by the lower additional rate threshold, which brings some higher rate taxpayers into the additional rate¹. The Personal Allowance is set at £12,570 from 2021 to 2022 through to 2030 to 2031, following an extension of the freeze at Autumn Budget 2025¹.

The bulletin also notes that the introduction of the advanced rate of Scottish Income Tax in 2024 to 2025 reclassified some Scottish income tax payers, with those on the advanced rate now classified as additional rate payers, contributing to a large increase in additional rate payers in Scotland from 2024 to 2025¹. Income tax rates and bands on non-savings, non-dividend income are devolved, while the Personal Allowance remains reserved¹.

Why it matters for households

The lower threshold means anyone with taxable income above £125,140 pays 45% on the portion above that figure, rather than only those above £150,000. Because the threshold has been frozen rather than indexed, more people reach it as pay rises, and HMRC's projections show the additional rate population rising from 893,000 in 2023 to 2024 to 1.29 million in 2026 to 2027¹. The freeze on the Personal Allowance at £12,570 and on the higher rate threshold has the same effect further down the income scale: HMRC says the number of income tax payers rose by 2.2 million to 36.7 million in 2023 to 2024, driven by the frozen allowance and income growth, and is projected to reach 40.8 million by 2026 to 2027¹. The proportion paying the higher rate is projected to rise from 15.7% to 18.9% over the same period¹. How much tax someone pays depends on their total income, its composition and their allowances; the income tax guide sets out the bands and rates.

What happens next

The additional rate threshold is frozen at £125,140, and HMRC's projections run to the 2026 to 2027 tax year¹. The Personal Allowance freeze runs to 2030 to 2031¹. No further change to the additional rate threshold has been reported.