The phenomenon known as fiscal drag — where more people pay more tax as wages increase because tax thresholds remain frozen — means that 6 million more people will pay income tax this tax year than in 2021-22. Almost 7.1 million workers are now in the higher income tax band, up 2.6 million since 2021-22, and the number of additional-rate payers has almost doubled to 1.2 million. Collectively, we’re set to pay £298.6 billion in income tax in 2025-26 — an extra £89 billion compared with four years ago, the latest government figures show, and this is set to rise further because income tax thresholds will remain frozen until at least 2028. We’re also on track to pay £6 billion in tax on our savings and £18.6 billion on dividends. “Fiscal drag has had a devastating impact on the tax we pay.
