Strategies for a high tax environment
Tax burdens change as you earn more
After almost a decade of personal allowance increases, the last four tax years have seen the personal allowance and the higher-rate tax thresholds frozen. This covert revenue-raising method has meant that in 2026/27 the proportion of the age 16+ population who are income tax payers is estimated to be 70%, against 59% in 2020/21. The Office for Budget Responsibility (OBR) calculates that by 2030/31 the proportion of income tax taxpayers in the higher- or additional-rate tax bands will have risen to 24% from 15% in 2020/21.
The figures reflect a truth often felt by some – that the tax burden increases as you start to earn more. The previous government’s focus on cutting individual national insurance contribution (NIC) rates underlined how politically difficult it is to reduce income-tax rates at high-income levels. Those NIC cuts have now been overshadowed by a further extension of the threshold freezes until April 2031 in the Autumn 2025 Budget and other measures such as:
- an increase in dividend tax rates in 2026/27;
- a rise in the tax rates on interest and other savings income from 2027/28; and
- an increase in the tax rates for property income, also from 2027/28.
Scotland has found its own way of turning the income tax screw. For example, in 2024/25 it introduce a new ‘advanced rate’ at 45% on income above £75,000 and made a 1% addition to the top rate of tax, taking it to 48%.
This guide looks at ways to mitigate that high-tax environment.
