One in five workers will be higher rate taxpayers by 2027 says IFS

A new report released by the Institute for Fiscal Studies (IFS) has revealed a startling projection: by the year 2027, one in every five workers in the United Kingdom will fall into the higher rate tax bracket. The findings have sparked concerns about the growing burden on the middle class and the potential implications for the country’s economy.

According to the IFS, the rise in the number of higher rate taxpayers can be attributed to a combination of factors. One of the primary drivers is wage growth, which has been outpacing the rate at which tax thresholds are increasing. As salaries continue to rise, more individuals are crossing the threshold and entering the higher rate tax band.

The report highlights the significance of this trend, as it represents a substantial shift in the tax burden from the wealthy to the middle-income earners. Traditionally, higher rate taxpayers have been viewed as the affluent minority, comprising those with significant incomes and wealth. However, the IFS  predicts that this will no longer be the case, with a growing number of individuals from more modest income brackets being pushed into the higher rate band.

The implications of this shift are far-reaching. For one, it places an increasing burden on the middle class, who already face rising living costs and other financial pressures. With a larger proportion of their income being subject to higher tax rates, these individuals will have less disposable income, which could impact their ability to save, invest, or contribute to the overall economy.

Furthermore, the IFS report suggests that this trend could have political ramifications. The middle class has traditionally been a key demographic for political parties, and their support is often sought after during elections. If a significant portion of this group feels financially squeezed due to higher taxes, it could influence their voting patterns and potentially shape political discourse around tax policy.

The report also raises questions about income inequality and social mobility. As more individuals become higher rate taxpayers, it could exacerbate the wealth divide in society. The prospect of a shrinking middle class and an expanding higher rate taxpayer base raises concerns about the ability of individuals to move up the income ladder and achieve upward social mobility.

In response to these findings, policymakers will need to carefully consider the potential consequences of this shift. They may need to explore options such as adjusting tax thresholds to better align with wage growth or implementing tax relief measures that alleviate the burden on the middle class.

Since 1992, D E Ball Co Limited has been an independent business advisory service based in Telford, Shropshire. With their advisors working with businesses in the agriculture, services, construction and retailer sectors, they have a broad span of knowledge to offer. To find out more about D E Ball and recent statements, click here:


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