Fiscal Drag

Almost four million people now pay income tax on their earnings at forty per cent compared to just over two million when Gordon Brown became Chancellor. Hundreds of thousands of middle-income taxpayers are now paying some of their income at the top rate because income tax allowances have not risen as fast as wages over the last decade. This is known as fiscal drag. This tax year (2008-09), the basic Personal Allowance - or tax-free amount - is £5,435. Taxable income is charged at 20% for incomes between £1 to £36,000 and then at the top rate of 40% for any earned income above that. On average, higher rate taxpayers each contributed £22,400 to the government’s finances last year.

More tax details here

The Times covered Fiscal Drag in an article a few years ago ... still relevant today

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