UK set for biggest tax rise in at least 50 years
The UK is on course to see its biggest tax rise in at least 50 years as a result of the freeze on personal tax thresholds and soaring inflation, according to analysis from the Resolution Foundation.
9th November 2023
Gavin Jones See profile
The think-tank said taxpayers are set to pay over £40 billion a year extra by 2028 due to the changes, significantly up from a forecast of £30 billion at the time of this years March Budget.
A four-year freeze in personal tax thresholds – the Personal Tax Allowance and Higher Rate Thresholds for Income Tax – was first announced in the 2021 Budget. At the time, it was forecast to raise £8 billion a year once fully rolled out in 2025/26.
In the Autumn Statement 2022, this was supplemented by a two-year extension of the policy through to 2027/28, and the addition of an employer National Insurance threshold freeze.
The more recent inflation shock has significantly increased the size of this tax rise as income has continued to rise sharply.
Adam Corlett, Principal Economist at the Resolution Foundation, said:
‘Abandoning the usual uprating of tax thresholds is a tried and tested way for governments of all stripes to raise revenue in a stealthy way.
‘But it is the far bigger than anticipated scale of the government’s £40 billion stealth tax rise that stands out.
‘The reality of the largest, and ongoing, tax rise on incomes in at least 50 years is why any talk of pre-election tax cuts will inevitably be seen in the wider context of some far bigger tax rises.’
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