2m extra Britons to pay higher rate tax

The number of higher rate taxpayers in the UK is set to increase 65% over the next four years from 4.1m to 6.8m, according to the latest figures from the Office for Budget Responsibility (OBR).

The estimates are 1m higher than previous figures given by the OBR.

The OBR said the increase in the expected number of higher rate taxpayers in the UK by 2026 is a result of rising inflation.

The threshold for higher rate tax has been frozen at £50,270 until April 2026.

Without the freeze the OBR expected the number of higher rate taxpayers to have risen more steadily from 4.1m in 2021/22 to 4.8m by 2025/26.

Sean McCann, Chartered Financial Planner at NFU Mutual, said thousands of people are likely to be unaware they are likely to fall within the higher rate tax bracket within the next four year and will not know how to prepare.

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One area he said many are unlikely to know about is how to claim back extra tax relief on pension contributions.

He said: “Once you become a higher rate tax-payer you become entitled to extra tax relief on your pension contributions. It’s estimated that around £750m in higher rate tax relief goes unclaimed each year.

“If your employer deducts your pension contributions before you pay tax, you’ll get the extra tax relief automatically. Otherwise you’ll need to claim via a tax return.”

He also warned parents to be careful to watch our for the Child Benefit tax charge.

Once a parent’s income reaches £50,000, for every £100 of income over the limit the parent will need to repay 1% of any child benefit.

You can also become liable for the charge when living with a partner claiming child benefit, even if not the parent of the children.

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