HMRC update reveals two million people will fall into ‘tax trap’ | Personal Finance | Finance

A record high number of people will fall into what’s widely been described as a £100,000 “tax trap” in the year ahead, new analysis shows. An additional 112,000 people are reportedly set to earn over £100,000 in the 2026-27 tax year, bringing the total to more than two million workers.

The figures are from new forecasts by HMRC as experts continue to voice concerns over whether some of the UK’s most well-paid workers will seek to leave the country due to tax levels. Rising pay and frozen thresholds have seen more people facing higher tax in recent years. Chancellor Rachel Reeves has extended a freeze on income tax thresholds to the 2030-31 tax year.

The move, set to raise £7.6 billion in revenue by 2030, was confirmed in November’s Budget with forecasts showing overall, around a quarter of taxpayers will be paying a higher rate of tax by 2030.

Some 2.06 million people are set to earn above £100,000 in the 2026-27 tax year, per The Telegraph.

They will lose 62p of every pound to National Insurance and income tax on earnings between £100,000 and £125,140 as the tax-free personal allowance starts to diminish once workers earn six figures, the newspaper reported.

A further 240,000 are expected to fall into this bracket in 2028-29 tax year.

There are concerns Ms Reeves’ decision to cap ‘salary-sacrifice’ schemes at £2,000 a year from April 2029 could also push more people to face greater taxation.

The schemes see people make additional pension contributions, while enabling take-home pay to be maintained as less is paid in National Insurance Contributions.

Rob Lewis, from Celtic Financial Planning, warned the number of high-earners leaving the country is likely to increase.

He told The Telegraph: “It’s the thing I’m most worried about.

“High earners could do their job anywhere. How many millionaires will leave the country? I’ve had more discussions with clients about leaving to places like Dubai to get more value for money.”

“People who put the most money into the coffers are leaving, so although taxes have increased, we’ll get less revenue.”