Henrys face horrid Budget amid looming tax raid
High Earners Not Rich Yet individuals, also known as Henrys, are bracing for a horrid Budget as they could face a tax rate higher than a current level of 60 per cent, analysts have warned.
Henrys, who are generally classed as professionals earning around £100,000 or more and often have little savings or fewer assets, could see tax hikes at Chancellor Rachel Reeves’ Budget fall disproportionately on them.
High earners between £100,000 and £125,140 are taxed more heavily as the personal allowance of £12,570 goes down for every pound extra earned above the threshold.
Hargreaves Lansdown calculations already show that the effective tax rate is at around 60 per cent for these earners while childcare support from the government is also lost for earners above £100,000, adding costs on Henrys not incurred by lower earners.
Analysts at the investment platform have warned that an extension to a freeze on income tax thresholds, which has been widely floated by leading economics think tanks and media reports, could make more Brits fall into the tax trap depending on wage growth.
Analysis has also shown that the number of people already in the tax trap could be dragged into the top tax band.
The number of people paying at the additional rate of tax of 45 per cent over £125,140 has already more than doubled since 2022.
Henrys would be hit by rumoured pension pot tax raid
Other suggested tax hikes on pension pots and investments could also hit Henrys.
Some employers allow salaries to be channelled into pension schemes, which benefit from greater tax reliefs.
But suggestions that the top rate of pension tax relief for higher earners could be cut to a flat 20 per cent rate for all earners would hit Henrys hoping to build their savings, including those who have made salary sacrifices to avoid having to hand over more cash into government coffers.
The change to a flat rate of tax relief could raise billions of pounds for the government as the scheme would mean the Treasury has to incur fewer costs for higher earners, given the effectively larger top-up for those saving more would be reduced.
Changes to property taxes – and specifically council tax, made to ensure more expensive properties in current prices are levied at higher rates – could see Henrys across London and bigger cities across the UK hit with higher bills.
“When George Osborne was Chancellor, he considered creating new levels of council tax on pricier properties, and the current government could choose to explore it again,” said Sarah Coles, head of personal finance at Hargreaves Lansdown.
“They might also consider some sort of surcharge on more expensive properties – or even a more wide-ranging reform that leant more heavily on pricier homes. Henrys would be in the frame for even higher tax bills.”