More than 1.9 million taxpayers are expected to lose part or all of their tax-free Personal Allowance this year as a result of frozen tax thresholds.
Approximately 1.18 million individuals will lose their full £12,570 allowance during the 2025/26 tax year, compared with 1.09 million in 2024/25. Under current tax rules, individuals earning above £100,000 gradually lose their Personal Allowance, which effectively creates a 60% marginal tax rate on income within that range.
Financial advisers note that certain tax planning strategies may help reduce the impact. For example, making pension contributions before the end of the tax year on April 5 could restore part or all of the tax-free allowance.
The ongoing freeze in income tax thresholds continues to bring more taxpayers into higher effective tax bands, increasing overall tax liabilities for higher earners.
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