Nearly two million people are set to be caught up in a £9billion "stealth tax bombshell" by the end of the decade as they are dragged into higher tax bands.
An extra 1.9 million people would be pushed into a higher tax bracket by 2030 due to freezes on income tax thresholds, according to figures commissioned by the Liberal Democrats.
The Government has frozen the level at which workers start paying income tax until April 2028, a policy that will bring in billions in additional revenue.
Data from the House of Commons library showed the hardest hit areas will be London and the southeast.
Data from the House of Commons library revealed that this freeze would bring in an estimated £8.9billion in additional tax revenue. The policy means that as wages rise with inflation, more workers find themselves pushed into higher tax brackets without actually becoming better off in real terms.
This phenomenon, known as "fiscal drag", has already led to a significant increase in the number of higher-rate taxpayers. HMRC figures show that in the 2022-23 tax year, there were 5.1 million people paying the higher rate of tax, which was 680,000 (15.3 per cent) more than the previous year.
fiscal drag", has already led to a significant increase in the number of higher-rate taxpayers
GETYYLondon and the South East will bear the brunt of this tax increase, with about £3billion in additional tax to be paid between now and the end of the 2029-2030 financial year.
The latest HMRC figures show the number of higher-rate taxpayers has topped five million for the first time. This represents a significant increase compared to five years earlier, when there were 4.2 million people paying the higher rate.
An income tax rate of 40 per cent applies to earnings over £50,271. This threshold has been frozen at the 2021/22 level and will remain in place until April 2028, meaning more people are dragged into higher tax brackets as their earnings grow.
The Liberal Democrats have strongly criticised both major parties over the tax threshold freeze.
Daisy Cooper, the Lib Dems' Treasury spokeswoman, said: "During the midst of the worst cost of living crisis for a generation, people are now set to be hammered once again by this stealth tax bombshell. People should be rewarded for their hard work, not seeing earnings ripped away through these punitive measures."
An income tax rate of 40 per cent applies to earnings over £50,271
GETTYShe added: "The Conservatives' economic vandalism led us into this mess, but this Labour government has proven clueless in generating the growth needed to break this stagnation.
"The only way we can bring the tax bill down, protect family finances and rebuild public services is through meaningful economic growth."
The number of people paying the additional tax rate of 45 per cent on earnings over £125,140 also rose to 600,000 in 2022/23, which was 9.5 per cent more than the previous year.
The freezes to income tax and national insurance thresholds date back to 2021
GETTYThese additional-rate taxpayers made up nearly 2 per cent of all taxpayers but accounted for 34 per cent of income tax raised.
The freezes to income tax and national insurance thresholds date back to 2021, when Rishi Sunak as Chancellor was attempting to build revenue in the aftermath of the pandemic.
Before winning power, Labour had criticised these threshold freezes, with Rachel Reeves arguing in 2023 that the Conservatives' policy had "picked the pockets of working people".
