“The data shows that since 1991 more and more people have been pulled into the higher-rate tax band. Around 15% now pay either higher or additional-rate tax, whereas in 1991 less than 7% fell into this bracket.
“As a result, the power of income has waned for those that have stumbled into higher-rate tax. The impact would become even more noticeable were the 50p rate to be re-introduced in the future.
“However, in recent years some tax-free savings allowances have increased, giving savers the opportunity to ensure more of their post-tax income is subsequently placed out of the taxman’s reach. With income-power declining, it is more important than ever for people to make use of these allowances and deploy some of their post-tax earnings as long-term savings.
“While the annual allowance for pension savings has come down, individuals should still ensure they make the most of the available allowance, as income deferred into a pension incurs no income tax. In addition, many employers will share some of the National Insurance savings they make, providing a further top-up to the pension contribution.
“The increase in income tax liability combined with opportunities to shelter savings within a tax-wrapper should encourage people to focus on making their money work harder, rather than simply working harder to make more money.”