Record 2m workers to fall into £100,000 tax trap bracket - here’s what it means
Record two million workers face the six-figure tax trap
- A record two million workers are expected to face the "six-figure tax trap", with an additional 112,000 people forecast to earn over £100,000 from April.
- This trap results in an effective tax rate of 60 per cent, or up to 62 pence in every pound, for earnings between £100,000 and £125,140.
- The higher effective tax rate is due to the gradual loss of the £12,570 personal allowance for those earning over £100,000.
- Parents earning above this threshold also lose their entitlement to 30 hours of free childcare, which can be worth about £9,000 annually.
- The increasing number of affected individuals is attributed to wage growth, inflation, and frozen tax thresholds, a phenomenon known as fiscal drag, impacting middle-earners.