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The number of taxpayers caught in the UK’s 60% ‘tax trap’ for high earners has increased 23% in the past 12 months, from 436,000 to 537,000, according to Bowmore Financial Planning.
A flaw in the tax system means that people earning between £100,000 and £125,140 pay 60% income tax on that slice of their earnings.
This is because the tax-free personal allowance of £12,570 is gradually removed once earnings exceed £100,000 annually.
The number of people caught in the high earner ‘tax trap’ has jumped in the past year as inflation continues to drive up wages.
Bowmore has called upon the new Labour government to take “urgent action” to address this.
Mark Incledon, chief executive at Bowmore, said: “With so many more taxpayers reaching six figure earnings, the ‘tax trap’ puts higher earners at a big disadvantage. The last Government didn’t intend this but the problem has been ignored. We hope the new Government can fix this as soon as possible.”
“Reaching a six-figure salary has long been a major goal for a lot of people. We all understand that this comes with the obligation to pay more tax. Unfortunately, if HMRC takes 60p in every pound you earn above £100k, the lure of getting there is a lot more limited.”
He added: “With the increased cost of living eroding the real value of salary increases, the incoming Government must address the tax trap for higher earners. It only disincentives people from working harder, being more productive and ultimately generating economic growth.”
