An extra 1.4 million people, including accountants, could find themselves paying income tax at the higher rate by 2015, according to Grant Thornton.
The UK firm of chartered accountants has calculated that if salaries increase at the rate government economists predict, the UK will have 5.5 million higher rate taxpayers within the next four years. Even if salaries only increase by 2.5%, an additional 700,000 people will find themselves in the higher tax bracket.
Grant Thornton’s senior tax adviser, Mike Warburton, said he used data from the OBR for his analysis, but the 2.5% figure might provide a more appropriate prediction.
Last June, the Chancellor of the Exchequer, George Osborne, announced that he was freezing tax thresholds for three years. The freeze, coupled with increasing salaries, would mean twice as many people would be higher rate taxpayers in 2015 than there were in 1997.
A spokesman for the Treasury said these calculations had been drawn up using historic figures and the Government is committed to increasing personal allowances in real terms each year.
The threshold for higher rate taxpayers fell from £37,401 in 2010-11 to £35,001 as from April this year. At the time, the IFS estimated that this change would affect 750,000 taxpayers.
Lower rate taxpayers will be hoping that the Government sticks to its aspiration of raising the income tax personal allowance to £10,000 by 2015-16. Whilst this would free an extra one million people from the burden of income tax, 850,000 more would end up paying the higher rate, according to the IFS study.