Labour to slap millions of Britons with £121billion stealth tax raid

New Dispatch Published Jul 15, 2026 Reviewed Jul 16, 2026 ✓ Reviewed by citations.press editors

Labour is set to collect £121 billion through stealth taxation, as over seven million people are dragged into higher tax rates due to frozen thresholds and higher wages.

121000000000 GBP · Labour tax revenue

Over seven million people are set to pay the higher rate of tax due to Labour's frozen tax thresholds and higher wages.

7000000 people · people paying higher rate tax

In the last two years, an extra million people are set to pay the higher rate of tax after the Government’s combination of frozen thresholds and higher wages.

1000000 people · additional people pushed into higher tax rate

Almost one in four taxpayers will be over state pension age by the end of this tax year, meaning pensioners could be set to pay tax on their state pensions alone by 2027.

25 % · taxpayers over state pension age

Around 1.3 million people are set to pay the 45 per cent additional rate, more than double 2021/22 levels, making up 3.2 per cent of all taxpayers.

1300000 people · people paying 45% additional rate tax3.2 % · share of all taxpayers paying 45% rate

In the 2026/27 tax year, the nation is expected to pay £347 billion in tax, an increase of £121 billion compared to the last time tax thresholds increased in 2021/22.

347000000000 GBP · total UK tax revenue121000000000 GBP · increase in tax revenue since 2021/22

In the past year alone, it’s expected that the Government will take in an extra £18 billion in income tax.

18000000000 GBP · additional income tax revenue

Britons face a record peace-time tax burden, with tax revenue expected to reach a record of 38.3 per cent of GDP by 2030/31.

38.3 % · tax revenue as share of GDP

Reform UK claims the incoming Prime Minister's spending pledges will require an extra £38 billion in tax rises on the wealthiest.

38000000000 GBP · additional tax revenue required for spending pledges

Labour is set to collect £121billion through stealth taxation, as millions more are dragged into higher rates of tax.

In the last two years, an extra million people are set to pay the higher rate of tax after the Government as a combination of frozen thresholds and higher wages mean Britons are hit by fiscal drag.

The tax raids are set to hit pension age Britons particularly hard, with almost one in four taxpayers will be over state pension age by the end of this tax year.

This means pensioners could be set to pay tax on their state pensions alone by 2027.

Laura Suter, director of personal finance at AJ Bell, said: “The nation is paying more tax, and that trend isn’t ending any time soon.

"The latest figures show a huge increase in the number of people paying income tax, as frozen allowances and high wage growth combine forces to squeeze the incomes of the working population."

She added that frozen thresholds impact most people who pay income tax, from pensioners to anyone earning more than the £12,570 personal allowance.

"But the biggest impact is felt by those pushed into a higher tax band. Once your income exceeds £50,270, every additional pound you earn is taxed at 40 per cent, rather than the 20 per cent basic rate," she said.

Around 1.3 million people set to pay the 45 per cent additional rate, more than double 2021/22 levels, making up 3.2 per cent of all taxpayers.

In the 2026/27 tax year, the nation is expected to pay £347billion in tax.

This is an increase of £121billion compared to the last time tax thresholds increased in 2021/22.

Ms Suter added: "Even in the past year alone, it’s expected that the Government will take in an extra £18 billion in income tax."

"This highlights the conundrum for the incoming prime minister, Andy Burnham.

"While the frozen tax bands are squeezing the nation’s pay packets until the pips squeak, they are a very lucrative source of income for the Government – one it can ill afford to lose.”

The data comes as Reform UK have claimed that the incoming Prime Minister's spending pledges will require an extra £38billion in tax rises on the wealthiest.

Robert Jenrick, the party's economy spokesman, said: “Andy Burnham has spent 20 years reaching for other people’s money – a death tax on family homes, a graduate tax on young people getting their first pay cheque, a £14billion raid on savings and investment, and new levies on everything from your parking space at work to your weekend away."

This comes as Britons already face a record peace-time tax burden, with tax revenue is expected to reach a record of 38.3 per cent of GDP by 2030/31

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