With the start of the new tax year underway, workers may have recently had their first payday of the year and an increase in their take home pay following the cuts to National Insurance contributions in the recent budget. Indeed, the prime minister has been keen to highlight this with a series of social media videos highlighting the potential benefits.

However, information obtained by RSM UK from a freedom of information request to HMRC highlights how much better off workers could have been if there had been a significant increase to the higher rate income tax threshold, as had once been promised by Boris Johnson. 

Increasing the higher rate income tax threshold to £80,000 was one of Boris Johnson’s key commitments in his campaign to become leader of the Conservative party in 2019 but the idea was soon abandoned once the leadership contest was settled. 

Increasing the threshold at which higher rate income tax is paid was reportedly considered again in Downing Street ahead of the Autumn Statement last year. Whilst the chancellor’s immediate plan is seemingly focused on cutting National Insurance contributions further, perhaps this is an idea which might be revisited in a Conservative election manifesto, particularly given Reform UK have included something similar in theirs.

The data provided by HMRC estimates the number of individuals with total income assessable for tax before allowances and deductions between £50,270 (the threshold at which 40% income tax will be due for most people) and £80,000 for the 2022/23 tax year, broken down by region, as shown below:

North East115,000
North West365,000
Yorkshire and the Humber245,000
East Midlands245,000
West Midlands295,000
East of England430,000
South East705,000
South West330,000
Northern Ireland80,000
Unknown/Address Abroad15,000

HMRC also estimated that the total amount of income assessable for tax between £50,270 and £80,000 was £242bn. 

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In light of this, if the higher rate threshold had been increased to £80,000 then this might have saved 3.965m taxpayers an income tax liability in the region of £48.4bn in the 2022/23 tax year. 

This income tax saving calculation assumes the income of £242bn would have been taxed at a rate of 20% rather than 40%. The precise tax saving figure is likely to be different as individuals could have received dividend income, which might increase the tax saving achieved, whilst others might have benefitted from lower income tax rates as a result of charitable donations or pension contributions.

Given the scale of the potential cost involved, it is not difficult to see why Boris Johnson may have been persuaded to move away from the idea. The policy may have its supporters but the chancellor is unlikely to be able to finance such a move in the short term. The best taxpayers can realistically hope for is a return to raising thresholds and allowances in line with inflation but major political parties of all flavours will likely find it difficult to fund anything that goes much beyond that in the year ahead.