Money12:46, 29 May 2026Frozen tax thresholds have seen seven million people dragged into the income tax net, according to analysis.‌There were 40 million income taxpayers in the 2025/26 tax year – up 1.3 million in a year and 7 million since the tax thresholds were frozen in 2021/22.‌The personal allowance, which is how much you can earn before you start to pay tax, is currently set at £12,570.‌When you earn above this amount, you pay the basic 20% rate of income tax. The higher 40% rate applies on earnings above £50,270, while the additional 45% rate kicks in when you start to earn more than £125,140.In her Budget last November, Rachel Reeves confirmed she was extending the freeze on this level by another three years - meaning it will now not rise until 2031.‌The freezing of tax brackets is known as fiscal drag, as more people are dragged into higher tax brackets over time when their wages increase.It is also described as a stealth tax, as it is a way for the government to collect more tax without actually putting up the rate of tax that people are paying.The number of income taxpayers is set to keep rising until the end of the freeze.‌Sarah Coles, head of personal finance at AJ Bell, said: "The fact that so many more people are paying tax – and so many more doing so at higher rates – means it’s worth considering ways to keep income tax to a minimum."This could include making pension contributions and getting tax relief at your highest marginal rate. It might mean using a Cash ISA to protect your savings interest from tax. If changing tax brackets means paying more tax on your investments, a Stocks and Shares ISA will protect you from dividend and capital gains tax."A further 5,000 estates became liable for inheritance tax during the last tax year. There were 32,000 estates liable for inheritance tax in 2025/26 - up by 5,000 since rates reached their current level in 2020/21.Article continues belowThe number of estates paying inheritance tax at death is also expected to jump by 10,500 in 2027/28.Ms Coles added: “Inheritance tax still only affects those leaving large estates – especially if they are part of a married couple and leaving a property to children.“However, 5,000 more estates than in 2020/21 are now getting a tax bill each year, so it’s worth considering whether you can make any gifts during your lifetime to reduce a potential tax bill.”Choose Daily Mirror as a 'Preferred Source' on Google News for quick access to the news you value.‌TaxInheritance tax