Pensions tax planning for high earners
Mitigating a high tax bill
With continuing intense pressure on government finances, the November 2025 Budget confirmed that the overall tax burden in the UK is on course for the highest overall tax burden in modern peacetime history, with higher earners continuing to shoulder most of the burden. Higher and additional rate taxpayers currently pay over two thirds of all income tax.
Figures published by the government in June 2025 showed that the tax gap estimate i.e. the difference between what tax is expected to be paid and actually paid was 5.3% for the 2023/24 tax year. As a result, in order to close the tax gap, in the November 2025 Budget the government announced changes to raise about £26 billion a year in additional tax revenue by the end of the forecast period (2029/30). This will be achieved mainly via extending tax threshold freezes, and higher taxes on investment, savings, and property income.
Around one in five income tax payers is currently taxed at the higher or additional rate, up from one in seven four years ago, and the proportion will continue to increase because of frozen tax allowances and bands until 5 April 2031. The threshold for paying additional rate tax reduced from tax year 2023/24 from £150,000 to £125,140, while income between £100,000 and £125,140 is effectively taxed at 60% (67.5% in Scotland) because of the tapered reduction to the personal allowance.
