Income taxpayers to leap by 4.4 million in 3 years

“If the statistics are boring,” said Edward R. Tuft, “then you’ve got the wrong numbers.” He may have had a point, but when HMRC releases new statistics that income taxpayers are increasing by millions, then it’s worth sitting up and taking notice.

In the post, we’ll take a look at some of HMRC’s recently released statistics and see what they could mean for you.

Income taxpayers to rise

HMRC predicts that there will be 37.4 million income taxpayers in 2024/25. That’s a staggering 4.4 million more than in 2021/22. There are various reasons for this. Inflation and other factors have pushed up wages. At the same time the tax-free personal income tax allowance has remained static at £12,570 since 2021. It is currently set to remain frozen at this level until 2025. Between 2019 and 2021 it was £12,500, meaning the allowance will have increased by only £70 in the nine years since 2019. Little wonder that the number of income taxpayers is rising rapidly!

More pensioners are becoming income taxpayers

In 2024/5 there will be some 8.5 million income taxpayers over the state pension age. This is an increase of 26% since 2021/22 when there were 6.7 million people in the same position. This is partly because the state pension has grown thanks to the triple lock. In 2019/20 the maximum state pension was £8,546.20 per year. For 2024/25 it is £11,502.40. This brings many pensioners very close to the personal allowance thresholds. It now takes little additional income to tip a pensioner into becoming an income taxpayer.

More of us are becoming higher rate taxpayers

HMRC believes 6.31 million people will be higher rate income taxpayers in 2024/5. This compares to 4.43 million in 2021/22. As for additional rate income taxpayers, there will be 1.13 million of them in 2024/25. There were only 520,000 in 2021/22. Again, factors like rising wages and inflation have contributed to this scenario.

HMRC is raising more in dividend tax

HMRC hopes to raise £17.83 billion in dividend tax in 2024/25. This is an increase of 3.77 billion when compared to 2021/22. This is partly due to a shrinking tax-free dividend allowance. As recently as 2017/18, the allowance was £5,000. In 2024/25 it dropped to a low of £500.

HMRC is benefiting from more tax on savings

As interest rates have shot up and government has frozen the tax-free savings bands, the taxman has been able to take more of our savings. In 2024/25, HMRC expects to raise £10.37 billion from savings. This compares to £3.94 billion in 2021/22. This makes it more important to make use of your annual £20,000 ISA allowance.

The number of company car users is growing

There were 760,000 company car users in 2022/23, up 40,000 on the previous year. Some 29% of these were electric / hybrid car users. This means more people than ever need advice on company cars and tax efficiency.

What HMRC’s stats mean for you

HMRC’s stats paint a clear picture. Tax thresholds have remain largely frozen, while inflation, wage increases and other factors are pushing more of us into becoming income taxpayers. Not content with this, HMRC is also dipping more into our savings income, meaning it’s vital to use tax breaks like ISAs. With more company car users, businesses need advice on making their acquisition tax efficient.

In short, as more of us are affected by tax, more of us will be in need of experienced tax advice. If you need help with your tax affairs, please get in touch with one of our accountants today. They’d be delighted to help you.