Reversible data hiding in encrypted images (RDHEI) is used to embed secret data into an encrypted image to ensure data security and image privacy. However, a considerable portion of the existing methods do not achieve a high data embedding rate (ER) with complete reconstruction of the original image. Considering the aforementioned limitation, this paper proposes a new RDHEI method with contiguous space. The proposed method pre-processes the original image by dividing it into non-overlapping blocks to determine a label map based on absolute prediction errors. Next, the label map is encoded, and bit-plane shifting is done to create contiguous space for embedding. Thus, the proposed method effectively exploits local and overall image spatial correlation and creates a larger space for embedding in a bit-plane-wise manner. Compared to the state-of-the-art methods, the ER of the proposed method is significantly increased while ensuring complete reversibility and lossless extraction of the hidden data.