A leading think tank is warning that ‘hidden in plain sight’ tax rises could cost British households £800 a year, regardless of who wins the election.
Frozen Tax Thresholds Push More Households Into Higher Tax Bracket
The Resolution Foundation has issued a warning, pointing out that although the Conservatives and Labour are arguing over what taxes the alternative might impose if in power, the measures that have already been introduced will improve common tax revenues by around £23 billion a year until 2028-2029 anyway.
The reversal of the brief cuts to business rates, petrol duty and stamp duty land tax by spring 2019 is one of the measures in recent Budgets and Autumn Statements that neither party has promised to reverse.
These measures involve extending the six-month freeze on corporation tax and hedging thresholds for individuals across the country.
However, given that future inflation and wages will increase the pressure on more people to move into the higher tax bracket, a phenomenon known as the financial knock-on effect, the freeze on income tax prices will increase the Treasury’s turnover.
Income tax thresholds have been frozen since 2022 and are expected to remain frozen until April 2028.
According to the Resolution Foundation, the increase in corporation tax sales and higher income taxes has taken the total amount of tax collected by the Treasury to an all-time high.
From one in ten taxpayers in 2010 to at least one in six in 2023, an extra 3 million people, the share of taxpayers paying marginal tax will be 40% or higher.
However, this year’s reductions in social security contributions have changed the scenario for some middle-income earners.
Sunak’s £2,000 Tax Claim Disputed
Days have passed since Keir Starmer was accused by Rishi Sunak of raising taxes by £2,000 ‘for everyone’ throughout the first televised debate.
The Labour leader called the claim ‘absolute nonsense’ and Treasury Permanent Secretary James Bowler retorted that ministers had been given orders, which no longer meant that civil servants had generated the figure in question.
Nevertheless, the UK’s information watchdog criticised the Conservatives on Thursday for making the same claim. The Statistical Regulation Office said it was concerned that auditors could be unaware that the £2,000 was spread over four years, rather than an annual tax increase.
“History tells us that tax rises often come after general elections – and it is already very clear that there could be a general squeeze on public services – although this could be made more difficult if events continue to unfold on tax changes.” said Adam Corlett, senior economist at the Resolution Foundation.
