Should you turn down a pay rise?

One in six people have turned down or hesitated over a pay rise, bonus or promotion for fear of losing money, a new survey by pension provider Standard Life has found. 

The findings come after five years of frozen income tax thresholds, which have pushed millions more workers into higher tax bands as wages rise.

We look into which workers are thinking twice about accepting more money and explain how to cut your tax bill if a pay bump means HMRC takes a bigger slice of your earnings.

Who’s saying no to more money?

Private sector wage growth slowed to 2.9% in the three months to June 2026, according to the latest figures from the Office for National Statistics. That's the lowest it's been in six years and below the current rate of inflation of 3.1%.  

So you might expect workers to jump at the chance of a bigger pay cheque. But when Standard Life surveyed 2,000 UK adults in June 2026, 16% said they have hesitated or refused a pay rise, bonus or promotion in the past because they were concerned about higher taxes or lost allowances.

An additional 21% said they would consider doing the same if they were offered more money in the future, citing the same reasons.

Under-30s and parents worry most

Younger workers fret the most, with 28% of Gen Z (adults under 30) saying they have hesitated over or refused a pay increase. That's compared with 19% of Millennials (aged 30 to 45), and 10% of Gen X (46 to 61 years old). Only 3% of so-called Baby Boomers (aged 62 to 71) said they thought twice about accepting a salary rise.

Parents with children under 18 are also more likely to have hesitated, at 22% compared with 14% of non-parents. Some 9% of parents said they were worried about losing childcare support. 

Parents of nursery and pre-school children have been entitled to 15 to 30 hours of free childcare a week for 38 weeks a year since 2010. But the support is withdrawn once a single parent’s earnings top £100,000.

By 2030, an estimated 12,000 parents could turn down pay rises because of the threshold, according to separate analysis by the Centre for the Analysis of Taxation. It found the median average affected parent would need to earn around £105,000 to break even after losing their childcare support. By 2030, that figure is expected to rise to £124,000.

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Key information

How much income tax do we pay?

You pay income tax on the money you earn that exceeds the personal allowance – currently set at £12,570. If you live in England, Wales or Northern Ireland, the rate you pay is divided into three bands:

• 20% basic-rate: £12,570 to £50,270
• 40% higher-rate: £50,271 to £125,140
• 45% additional-rate: more than £125,140.

There are different tax bands and rates in Scotland.

Regardless of where you live in the UK, your personal allowance will be reduced by £1 for every £2 you earn over £100,000. This means that by the time you earn £125,140, you'll have to pay income tax on all of your income.

• Find out more: UK income tax rates

More workers dragged into higher-rate tax

Fears over the potential financial hit from a pay rise come as HMRC figures reveal millions of workers have seen their tax bills climb over the past five years.

This is likely down to a freeze in personal income tax thresholds, announced in 2021 and due to remain until at least April 2031. As wages continue to rise, more people are pushed into higher tax bands and hand more earnings to HMRC.

Overall, the number of UK income taxpayers has risen by 24%, from 33 million in 2021-22 to an estimated 40.8 million this financial year.

All tax brackets have seen a rise in numbers, but the biggest increase was seen in the higher-rate taxpayer group – the number of people paying high-rate tax on earnings has swelled by a colossal 74% over the last five years, from 4.43 million to 7.7 million. 

To put that into context, if we look at the previous five years – from 2016-17 to 2021-22 – the overall number of higher-rate taxpayers increased by only 20,000. That's a tiny 0.45% rise.

This graph shows how the number of higher-rate taxpayers has changed over the past eight years.

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What to do if you move into a higher tax band

Nobody wants to pay more tax than they have to. But turning down extra income to protect valuable allowances could mean missing out on money unnecessarily. 

If you’ve been pushed into a higher tax bracket, there are several ways to reduce your tax bill.

1. Invest in tax-free savings

You can put up to £20,000 in a cash and/or stocks and shares Isa, and any income generated can grow completely tax-free, protecting your savings now and in the future.

Be aware that from 6 April 2027, the amount you can stash in cash Isas will fall to £12,000 for savers under 65. To use the full £20,000 Isa allowance, the remaining £8,000 would need to be invested in a stocks and shares Isa.

You can also hold up to £50,000 tax-free in premium bonds, and every month you'll be entered into a prize draw with a chance of winning anything from £25 to £1m.

• Find out more: best cash Isa rates 2026

2. Pay more into your pension

One of the most common ways to reduce income tax is by contributing to a workplace or personal pension scheme. For example, a basic-rate taxpayer will get 20% tax relief on the money they put into the pension pot. So if you pay in £100, it would actually only cost you £80. 

It’s a little more complex if you're a higher or additional-rate taxpayer. Your provider will claim the basic rate of 20% tax relief for you, but you'll have to claim the remainder (20% for higher rate or 25% for additional rate) by filing a self-assessment tax return.

For example, if you earn £60,000 a year, you will be in the higher-rate band. By contributing £10,000 to your pension, you'll get 20% (£2,000) relief automatically, and you can claim another 20% in your tax return. As a result, the total cost to you will be just £6,000.

• Find out more: tax relief on pension contributions explained

3. Use your dividend allowance

If you're self-employed and own a limited company, it can be more tax-efficient to pay your income in the form of dividends. Not only do they attract lower rates of income tax than salary, but there are also no National Insurance contributions payable on dividends.

For example, the basic rate of income tax on dividends in 2026-27 is 10.75%, with the higher rate at 35.75% and the additional rate at 39.35%.

However, this has several disadvantages. Dividends can only be paid out of profits after corporation tax has been deducted (unlike salaries, which are tax-deductible expenses). Plus, they don’t count as ‘relevant UK earnings’ for tax relief on pension contributions that you make yourself.

• Find out more: dividend tax explained

4. Share your allowances

If you're in a relationship, organising your finances together can make allowances go even further and save you more on tax. 

For example, if your partner has an unused personal savings allowance, you could hold the cash in their name instead. 

Or, if one of you is a lower-rate taxpayer, it might make sense for them to have the bulk of the non-Isa savings, so you pay a lower tax rate on the savings interest.

• Find out more: tax on savings interest and investment income