IFS analysis reveals \u00a348,000 income bracket will see the steepest rise in tax burden as fiscal drag quietly reshapes the system. Treasury defends decision, but critics call it a targeted hit on Britain\u2019s working professionals.<\/p>\n\n\n\n
Rachel Reeves\u2019 decision to extend the freeze on income tax thresholds until 2031 <\/strong>has sparked sharp debate, with new data showing that middle-income earners stand to lose more in absolute terms than many higher earners. The policy, first introduced as a temporary measure in 2022<\/strong>, was prolonged under Labour\u2019s November Budget and now appears to be one of the government\u2019s most lucrative revenue-generating tools.<\/p>\n\n\n\n According to new analysis by the Institute for Fiscal Studies (IFS)<\/em>, workers earning \u00a348,000 per year will pay an additional \u00a3603.50<\/strong> in tax by the end of the freeze. These findings challenge Chancellor Reeves\u2019 stated aim of ensuring those with the \u201cbroadest shoulders\u201d contribute the most. While she has defended the policy as a necessary collective effort, opponents argue it contradicts Labour\u2019s earlier pledges.<\/p>\n\n\n\n The most significant impact of the income tax threshold freeze is falling not on high-income earners, but on those in the middle of the income distribution. The IFS data <\/a>shows that someone earning \u00a3150,000 <\/strong>annually will pay only \u00a3393.59<\/strong> more in tax over the same period, a figure notably lower than that faced by those on \u00a348,000<\/strong>.<\/p>\n\n\n\n This phenomenon is the result of fiscal drag, a process whereby income tax thresholds remain fixed while wages increase, causing individuals to be pushed into higher tax bands without any change in the official tax rates. An estimated 4.8 million <\/strong>people will be pulled into the 40 percent tax bracket,<\/strong> which was initially designed for the wealthiest earners.<\/p>\n\n\n\n The professions most affected include senior teachers, police officers, and NHS nurses, workers whose wages have risen modestly over recent years but now find themselves penalised. Reeves\u2019 freeze on thresholds was the single biggest revenue-raising<\/strong> measure in her budget, the IFS concluded, outpacing more visible fiscal moves such as the proposed mansion tax.<\/p>\n\n\n\nFiscal Drag Pulls Middle Earners Deeper into Tax Net<\/strong><\/h2>\n\n\n\n
Government Stance under Scrutiny amid Backlash<\/strong><\/h2>\n\n\n\n