Around 2.5m taxpayers face being pulled past the £100,000 Personal Allowance taper threshold by 2031, according to a forecast.
For those earning between £100,000 and £125,140, the Personal Allowance is cut by £1 for every £2 earned above £100,000, creating an effective marginal tax rate of 60%.
The £100,000 threshold taper has never increased since it was introduced in 2010. Had it risen in line with inflation, it would be around £160,000 today and £174,000 by 2031, according to analysis from investment platform IG.
Income tax thresholds are currently frozen until April 2031. While the Personal Allowance taper threshold is not formally covered by the freeze, it has remained unchanged since 2010 and has no automatic mechanism for increasing.
Moving it would require specific government intervention - making it highly unlikely to be raised ahead of the main income-tax thresholds.
Currently 2.06m people earn more than £100,000, up around 70% from 1.22m in 2021/22 and more than three times the 588,000 above the threshold in 2010 when it was introduced.
IG estimates that the freeze has generated the government an additional £29bn to date, compared with a scenario in which the threshold had risen with inflation.
The additional annual tax revenue is currently estimated at £5.2bn, rising to £7bn a year by 2031. IG expects the cumulative additional revenue generated by the freeze could exceed £52bn by 2031.
Michael Healy, CEO of IG Consumer, said: “The £100,000 threshold is becoming increasingly detached from reality. It has been frozen since 2010, a time when Gordon Brown was our Prime Minister and Gary Neville still played for Manchester United.
“Wages and inflation have risen sharply since that distant time, meaning millions more people have been dragged into a tax trap, or otherwise stunting their career development to avoid it.
“A promotion, bonus or pay rise should not feel like a financial cliff edge, and hard-working professionals are being disincentivised from taking that next step in their careers. Our hugely outdated tax system is holding back economic growth, and it should be a priority of the government to end the freeze if they’re serious about boosting investment in the UK .”
Tax generated by the Personal Allowance threshold
|
Tax year |
Indexed threshold |
Total taper raised (£bn) |
Element raised by £100,000 freeze (£bn) |
|
2010/11 |
£100,000 |
1.5 |
0 |
|
2015/16 |
£115,091 |
3.4 |
1.8 |
|
2020/21 |
£124,687 |
4.8 |
1.6 |
|
2026/27 |
£160,220 |
8.9 |
5.2 |
|
2030/31 |
£173,597 |
10.9 |
7.0 |
Source: IG calculations, 1 September 2026