Over half a million Brits dragged into higher rate tax due to Labour’s threshold freeze

EMBARGOED: Immediate Release

• A staggering 580,000 people across the UK will be dragged into the  higher rate of income tax this year  (2026-27) due to Labour’s decision to continue the Conservatives’ threshold freeze.
• 600,000 lower earners will also be dragged into basic rate income tax for the first time, thanks to the Government’s decision to freeze the Personal Allowance last April.
• Some nurses and teachers will be hit with a whopping £2,660 tax hit this year, thanks to income tax thresholds staying frozen since 2022.
• Liberal Democrat plans would take 2.5 million people out of income tax and 760,000 people out of the higher rate (40p) tax band by raising the personal allowance to £15,000 and the 40p threshold to £56,000 over five years.

New figures from the House of Commons Library, commissioned by the Liberal Democrats, reveal that more than half a million more people across the UK will be dragged into paying the 40p higher rate of income tax in 2026-27 as a result of the Labour Government’s decision to keep tax thresholds frozen this year.

580,000 people will be dragged into the higher rate tax band this year, due to Labour's stealth tax raid on workers. Among those affected are doctors, teachers and police officers, some of whom now face a £2,660 tax hit due to income tax bands staying frozen since 2022. The 'stealth tax penalty' is a result of Conservative and Labour Governments keeping income tax thresholds frozen.

Newly qualified nurses, classroom teachers, and police constables, earning between £32,073 and £34,069 are set to pay an additional £675 this year in combined income tax and National Insurance, due to the personal allowance staying frozen last April. Senior police constables making £52,014 face a tax hit of £570, while lead teaching practitioners and senior nurses, who can earn £81,861 and £79,504 respectively, are looking at a whopping £2,660 in extra tax this year.

Workers in every region of the country are set to be hit by this year’s stealth tax, the worst-affected regions being London, with 110,000 people set to be dragged into the 40p rate, and the South East, where another 100,000 people will be pushed into the higher rate.

The figures, commissioned from the House of Commons Library by the Liberal Democrats, follow the party announcing it would raise the personal allowance to £15,000 and the 40p threshold to £56,000 over five years, funded by the proceeds of joining the EU single market. The move would take 760,000 workers out of paying the higher rate, and 2.5 million out of income tax altogether, putting £680 back into the pockets of more than 30 million taxpayers.

Ahead of next week's budget, Liberal Democrat Treasury Spokesperson Daisy Cooper said that the Government must rip up its red lines on Europe and strike a new Growth and Defence partnership with the EU, to unlock the growth dividend that can bring down the record-high tax burden on families.

Liberal Democrat Treasury Spokesperson Daisy Cooper MP said:

“These figures expose the shocking scale of the stealth tax raid started by the Conservatives and continued by Labour.

“Our key workers such as nurses, teachers, and police officers work tirelessly, yet they’re being hit with a massive tax penalty just as energy bills rise and inflation soars.

“The Chancellor must finally realise that the only way to end the cost-of-living crisis is to get our economy growing strongly again. A Growth and Defence partnership with Europe, including joining the single market, can do just that, finally enabling us to ease the huge tax burden weighing people down.”

ENDS

Notes to Editors:

• House of Commons Library research on the impact of the 2026-27 income tax threshold freeze can be found here.
• Library research on teachers, nurses and doctors affected by stealth taxes can be found here.
• The party’s announcement on raising the personal allowance to £15,000 and the higher rate threshold to £56,000 over five years can be found here.