The UK is on course to see its biggest tax rise in at least 50 years as a result of the freeze on personal thresholds and soaring inflation, according to analysis from the Resolution Foundation.
The think-tank said taxpayers are set to pay over £40 billion a year by 2028, up from a forecast of £30 billion at the time of the 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 Budget 2021. At the time, it was forecast to raise £8 billion a year once fully rolled out in 2025/26.
In 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, which raised £6 billion.
The more recent inflation shock has significantly increased the size of this tax rise.
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.’
Internet links: Resolution Foundation