An estimated 17.9 million Brits are set to be dragged into the basic rate of income tax by 2027/28 as a result of frozen tax thresholds, Quilter has revealed.

The wealth management firm said that the current freeze on income tax thresholds has “significantly increased” the number of people paying tax for the first time.

Through new freedom of information data from HMRC, Quilter found that of the total 17.9 million people affected by the freeze, 11.6 million are set to be affected during its final three years, between 2025/26 and 2027/28.

The analysis also revealed that 8.2 million of these individuals are aged 60 and over, suggesting that those in receipt of pension income, including the state pension, will increasingly be forced to pay tax on their retirement income for the first time.

Quilter said the freeze on income tax thresholds has "not only exponentially increased" the number of people paying income tax, but also led to more people being taxed at a higher rates as their income grows while tax thresholds remain stagnant.

By the 2027/28 tax year, an additional 12 million people will be in the higher rate threshold, while a further two million will pay the additional rate of income tax.

Quilter also stated that as the freeze continues, more people are moving up the income tax brackets. Of the 12 million taxpayers expected to move into the higher rate of income tax, 68% will do so in the final three years of the freeze, while 70% of those moving into the additional rate tax band will do so in the same period.

Tax and financial planning expert at Quilter, Rachael Griffin, said: “During the 2024 Autumn Budget, Chancellor Rachel Reeves stated that extending the freeze until 2030 would boost Government coffers by billions of pounds. However, she also noted that it would hurt working people and go against Labour’s manifesto commitments, declaring there would be no extension. Instead, from 2028/29, personal tax thresholds would be uprated in line with inflation once again.

"Given the challenging fiscal position, there have been rumours that the Chancellor might backpedal and opt to freeze income tax thresholds until 2030. However, given the likely backlash and the Government’s commitment not to raise taxes for working people, this seems unlikely.

"Regardless of any extension, the lengthy freeze is resulting in a significant tax rise by stealth. Even without an explicit tax rise, the Government will continue to collect more from taxpayers each year by keeping thresholds static. What’s more, as the state pension rises while the personal allowance remains stagnant, many pensioners will soon find themselves having to pay back a proportion of their state pension."

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