More than two million British workers are expected to earn above £100,000 by the 2026-27 tax year, according to HMRC figures obtained by Rathbones. This marks a 5.7 per cent increase from the current estimate of 1.95 million, pushing more high earners into a tax bracket where crucial benefits, including free childcare, are withdrawn.
The surge follows Chancellor Rachel Reeves’ decision to extend the freeze on income tax thresholds until 2031, a policy critics label a “stealth tax” expected to raise £11 billion by the end of this Parliament. Once a household member’s earnings exceed £100,000, free childcare hours vanish, regardless of the other partner’s income.
Last year, 74,000 taxpayers fell into the £100,000–£125,000 bracket—a 12 per cent rise—bringing the total to 698,000. These so-called HENRYs (High Earners Not Rich Yet) face punitive marginal rates as the personal allowance of £12,570 is reduced by £1 for every £2 earned above £100,000, creating an effective 60 per cent tax rate on income between £100,000 and £125,140.
Olly Cheng, senior financial planning director at Rathbones, said: “Earning £100,000 once felt like financial freedom, but today it often comes with a hidden tax sting.” He noted that frozen thresholds and inflation erode real earnings, leaving high earners struggling to build wealth.
To mitigate the impact, Cheng recommends increasing pension contributions, particularly via salary sacrifice, which reduces income tax and National Insurance. Charitable donations under Gift Aid also lower adjusted net income. However, a £2,000 cap on tax-relievable pension contributions will take effect from April 2029.
