The new annual Income Tax statistics from HMRC show a 99.2% increase in additional rate Income Tax payers in the tax year 2023-2024 over 2020-2021. The freezing of tax bands, along with higher wages, showed an increased tax take across all types of taxpayers.
HMRC's Income Tax liabilities statistics: tax year 2020-2021 to tax year 2023-2024, are based on HMRC’s annual Survey of Personal Incomes, a representative sample of individuals in HMRC’s PAYE, Self Assessment and repayment claims administrative systems.
They show that there will be 4.2 million more taxpayers in the UK in 2023-2024 over 2020-2021.
Income Tax thresholds are frozen until 2027-28 under a policy first enacted by Rishi Sunak when he was Chancellor in 2021 and then extended by the Chancellor, Jeremy Hunt.
Income Tax numbers by payer type
- Basic rate: There is a 8.0% increase in basic rate taxpayers and savers rate Income Tax payers in 2023-2024 from 2020-2021.
- Basic rate Income Tax payers make up a projected 80.4% and savers rate Income Tax payers are projected to be 1.6% of the overall Income Tax paying population in 2023-2024.
- Higher rate: There are a projected 5.6 million higher rate Income Tax payers in tax year 2023-2024, which is a 40.7% increase compared to 2020-2021.
- Higher rate Income Tax payers make up a projected 15.6% of the overall Income Tax paying population in 2023 to 2024.
- Additional rate: There is a 99.2% increase in additional rate Income Tax payers in tax year 2023-2024 over 2020 -2021, to 862,000.
- Additional rate Income Tax payers make up a projected 2.4% of the overall Income Tax paying population in 2023-2024.
Lowest and highest
- Northern Ireland had the lowest number of Income Tax payers at 2.5% in 2020-2021, followed by the North East at 3.7%.
- The South East had the highest number of Income Tax payers at 14.7% in 2020-2021, while London had the second highest at 13.2%.
Who pays what
- Of the total earned income amongst all taxpayers, 74.5% of it in 2020-2021 went to the top 50% of Income Tax payers. This equates to £879 billion out of a total £1,180 billion.
- This resulted in a 49 percentage point income inequality between the top and bottom 50% of Income Tax payers (where 0 percentage points is completely equal).
- This measure of income inequality is expected to increase to 50.6 percentage points in 2023-2024 driven by the wages growth in the top 50% in 2021-2022 where income inequality increases 0.7 percentage points from 2020-2021.
- The top 50% of Income Tax payers were liable for 90.5% of total Income Tax in 2020-2021, or £177 billion out of a total £196 billion.
- The top 1% of Income Tax payers make up the majority of additional rate Income Tax payers and received 12.5% of total income in 2020-2021.
- in addition, the top 1% of Income Tax payers were liable for 29.1% of total Income Tax in 2020-021. This is projected to decrease to a 28.5% share of total Income Tax by 2023-2024.
Avoiding marginal rate tax
Following the freezing of Personal Allowances and tax bands and coupled with the High-Income Child Benefit Tax Charge (HICBC) many higher-rate taxpayers now have to navigate the effects of several different tax bands during their tax planning. The marginal tax rate when income exceeds a band may be as high as 70% of income.
We have created the table below to shows the different Income Tax bands and marginal rates that applied in 2022-23 (for the purpose of the statistics in this article) for earned and investment income.
| Bands |
Gross income 2022-23 £ |
Rate of tax (non-dividend income) % |
Notes |
| Personal allowance | 1 - 12,570 | 0 | |
| Basic rate | 12,571 - 50,000 | 20 | |
| Basic rate | 50,001 - 50,270 | 20 + CB1 | CB1: Claw back of Child Benefit payments: 1% of the Child Benefit received for every £100 of income between £50,000 and £60,000 |
| Higher rate | 50,271 – 60,000 | 40 + CB1 | CB1: Claw back of Child Benefit payments: 1% of the Child Benefit received for every £100 of income between £50,000 and £60,000 |
| Higher rate | 60,001 - 100,000 | 40 | |
| Higher rate | 100,001 – 125,140 | 60 | Claw back of personal allowance: restricted by £1 for every £2 of income above £100,000 |
| Higher rate | 125,141- 150,000 | 40 | |
| Additional rate |
150,001+ *This is reduced to £125,140 from April 2023. |
45 |
Relief for pension contributions is tapered for adjusted income over £240,000 At £150,000, you lose entitlement to the £500 Personal Savings Allowance |
Note: marginal rates of tax will differ for Scottish taxpayers. For example, for a Scottish taxpayer, the marginal rate in 2022-23 between £100,001 and £125,140 is 61.5%.
Tax Planning Strategies to avoid marginal tax rates and for avoiding higher rates of tax, the HICBC or clawback of personal allowances depend on the taxpayer.
Useful guides on this topic
What is the 2023/24 PAYE tax code?
What is the 2023/24 PAYE tax code? What do the different types of tax code suffixes mean?
Self Assessment Return 2022/23: What's new
2023 Self Assessment toolkit: top tips for completing tax returns for the year ending 5 April 2023.
Income Tax and allowances
Income Tax rates and allowances (England)
Sole trader v. limited company: Tax differences & savings (2023/24)
Is it better from both a tax and legal point of view to run your business as a sole trader or as a company? Are there tax advantages in running a business as a company? What legal protections apply?
External links
HMRC: National statistics: Summary Statistics
HMRC: National statistics, Bulletin - Supporting Documentation
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