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Fiscal Drag - One in five workers will be higher-rate taxpayers by 2027

Graham Watson

17th May 2023

The latest IFS peek under the bonnet of the tax system has revealed the 'hidden' effects of fixing freezing tax thresholds and personal allowances. As a result of this, by 2027, 20% of the population will be higher rate taxpayers and paying the 40% tax rate.

Such a phenomenon is called fiscal drag - and is an effective way of increasing the tax take, in this case, it is argued that this is the best way to 'repair' the public finances.

It represents a remarkable change: in 1991-92, 3.5% of all adults were higher rate taxpayers. By 2027-28, it will be nearly 15%.

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to tutor2u, reads voraciously and is interested in all aspects of Teaching and Learning.

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