HMRC figures confirm more people pulled into higher tax bands

HMRC estimates that around half a million more people will be pulled into the higher-rate tax bracket during the 2025-26 tax year, according to figures reported by Which? on 5 July 2025¹. The same data shows 420,000 more pensioners will pay tax on their retirement income by the end of the year¹.

HMRC estimates there will be around 39.1 million taxpayers by the end of 2025-26, up from 34.5 million in 2022-23¹. Of these, 30.8 million are basic-rate taxpayers, up from 30.4 million in 2022-23; 7.08 million are higher-rate taxpayers, up from 5.1 million; and 1.23 million pay the additional rate, up from 570,000¹. In total, 8.3 million people are in the higher or additional-rate brackets, a 45% rise since tax thresholds were frozen in 2021¹.

The income tax bands for England, Wales and Northern Ireland are unchanged for 2025-26¹:

The personal allowance is £12,570, and it is reduced by £1 for every £2 earned over £100,000, so by £125,140 all income is taxed¹. Scotland has different thresholds from the rest of the UK¹. Which? attributes the shift to thresholds being frozen since 2021, when most would previously have risen with CPI inflation, a process it describes as fiscal drag¹. It reports that freezes are set to last until 2028¹.

On pensioners, HMRC data shows 8.7 million UK taxpayers aged over 65 are expected, almost double the 4.9 million in 2010-11¹. The full new state pension is worth £11,973 a year and the basic full state pension £9,175¹. Which? states that someone receiving the full new state pension has £597 of personal allowance left before tax, so income from private or workplace pensions, investments or rent would take them over the threshold¹.

Why it matters for households

The change affects people whose pay or pension income has risen above a frozen threshold rather than those whose tax rates have changed. A basic-rate taxpayer earning above £50,270 moves to 40% on the excess, and the £100,000 personal allowance taper means an extra £2 of income above that level cuts the allowance by £1¹. For pensioners, the state pension alone uses most of the £12,570 allowance, so additional income is taxed from a low starting point¹. The freeze is reported as running to 2028, so the thresholds are not currently due to rise with inflation¹. How inflation normally feeds through to thresholds and benefits is set out in our guide to inflation-linked increases.

What happens next

The estimates cover the 2025-26 tax year, which ends on 5 April 2026¹. Tax thresholds remain frozen until 2028 under current policy¹. No further HMRC updates on the taxpayer numbers have been reported.