More than half a million people in the U.K. face a steep tax rate of 60 % on part of their earnings. This applies to individuals who earn between £100,000 to £125,150 yearly. The highest rate of tax paid, however, is usually 45 percent, but things get different once earnings fall between these amounts.

The trouble is that for each pound of earnings received above that threshold, 50p of the tax-free allowance is taken away. It turns something that should be a standard 40% tax into a whopping 60% rate of tax, between £100,000 and £125,150 of earnings.

Imagine someone on £100,000 received a £5,000 pay rise. Instead of pocketing most of this, 60% of that pay rise could go in tax. Yet somebody on £200,000 would lose just 45% of any pay rise above £125,150.

The number of people caught in this top tax bracket has increased by 23% the past year alone, now totaling 537,000 people. This is, in part, due to the effects of inflation that push up wages, which have the effect of pulling more people into this higher tax range.

They argue further that the tax structure needs to be reformed and made much fairer. Experts believe that such high tax rates discourage people from earning more and accordingly contributing more to economic growth.

Scotland makes things even tougher with its higher tax rates for earnings above £75,000. This regional disparity therefore takes the complication one step higher that high tax rates would be affecting higher earners.

It’s not just high earners feeling the squeeze. Pensioners have been hit by frozen tax thresholds, which mean that more are paying tax than a decade ago – despite the state pension having risen through the triple lock and other means.

Mark Incledon, the chief executive of Bowmore Financial Planning, said: “For most people this is a landmark salary. However, when you know that 60p of every pound you earn above £100,000 is effectively removed by the Government then clearly it becomes a less attractive figure to aspire to. The Treasury needs to do something about this tax trap as a matter of some urgency.

The number of people paying at this 40% tax rate increased to 6.3 million in that case. Experts have stated that this figure will continue rising in the coming years or even be part of a broader trend of income distribution and taxation policy.

In summary, it is quite clear that the present UK tax system hits hard on employees who fall within the £100,000 to £125,150 earnings spectrum. Many feel that this is a time for the UK government to review the system and begin reforms that would definitely lead to a much fairer tax system at all levels of income, which could promote economic productivity and encourage people to contribute more to the economy.

The issue of high marginal tax rates not only affects individual finances but also has broader implications for economic behavior and societal well-being. As discussions continue on how best to address these challenges, the need for equitable tax policies remains a critical priority for policymakers and taxpayers alike.