UK 40p Tax Rate: Third of Workforce to be Dragged Into Bracket

The Office for Budget Responsibility has revealed that 9.2 million Britons will fall into the 40p tax rate by 2033, while 1.7  million will tumble into the 45p bracket, equating to around a third of the UK workforce.

According to the group, the number of middle class owners paying the higher tax rate will more than double, but if the government pegged the bracket to rise in line with earnings instead, 4.6 million fewer people would be paying the 40p tax rate.

"But because earnings are expected to rise more quickly than prices in the long term (due to productivity growth), this would result in the average tax rate rising steadily over time as more income moves into higher tax bands," the OBR added.

UK Chancellor George Osborne raised the 40% tax rate bracket in the government's 2014 Budget announcement, to £41,865, from £41,540.

Osborne ignored calls from his own Conservative Party members that the bracket needed to be relaxed.

The architect of the 40p tax rate, Lord Nigel Lawson, called for Prime Minister David Cameron and Osborne to scrap the tax bracket as too many middle-income professionals have fallen into the higher band.

Lord Lawson, who introduced the 40% tax rate 25 years ago, said pushing more "middling professionals" into the tax band would be a "mistake."

While the Tories have pledged to help the poorest Britons by raising the tax-free personal allowance, which has dragged more than two million people out of the tax system, middle class pockets have become increasingly tight as wage rises drag more people into the higher tax band.

The 40% tax band was introduced a quarter of a century ago by the former Conservative Chancellor Lawson. At the time, only one in 20 people paid the higher rate, compared to one in six people today.

This equates to about 1.35  million in 1988, compared to 4.4 million people in 2013.

This has risen to 4.6 million and over the next year, this number is set to rise to 5 million.

"The government has taken significant steps to help hardworking people keep more of the money they earn," said the UK Treasury spokesperson in response to the OBR analysis.