In the autumn 2022 statement the Chancellor of the exchequer announced that the additional rate tax threshold will be reduced. The current income level is £150,000 with the new rate lowered to £125,140 from 6 April 2023 and is projected to remain in place until April 2028.
The lowered additional rate tax threshold will mean that more people will pay additional rate tax for the first time and for people who are already paying ART they will be more tax at the additional rate.
The government are reducing the ART threshold as part of their policy to put the public finances on a sustainable path with people on a higher income taking on a larger tax burden.
Other tax rate thresholds have been kept the same including the income tax free personal allowance.
What does lowering the additional rate tax rate mean?
The lowering of the ART will effect around 792,000 taxpayers.
Around 232,000 more people will pay income tax at the additional rate because of the rate being lowered.
Taxpayers who have income between £125,140 and £150,000 will on average have a cash loss in the region of £621 in the 23/24 tax year.
Taxpayers with an income above £150,000 are expected to face an average cash loss of £1256 in the 23/24 tax year.
What percentage is additional rate tax paid?
The rate of tax paid at the additional rate is 45%. The rate of 45% is not changing it is only the threshold that is altering. The personal allowance isn’t changing either staying at £12,570.
From the start of the 23/24 tax year one pound of the tax free Personal Allowance is withdrawn for every £2 of income above £100,000 up to £125,139. From income of £125,140 no personal allowance will be given.
How much more income tax will the government receive?
The increase in tax paid by additional rate taxpayers can be seen in the table below which details an estimated value from the 22/23 tax year up to the 27/28 tax year.
Government tax receipts (£m)
| 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 |
| +80 | +420 | +790 | +770 | +800 | +855 |
The figures stated can be found in table 5.1 of Autumn Statement 2022 which have been certified by the Office for Budget Responsibility.
In combination with the freezing of the personal allowance the OBR have estimated that an additional £26bn will be generated in tax revenue.
