Hit by stealth taxes

Tory stealth taxes drag millions more into 40% rate

Figures from the Office of Budget Responsibility (OBR) show an extra 2.2m people will be brought into the 40% tax rate by the next election. This will bring the total number paying the higher rate to around 6.5m – up more than 60% in five years. A further 300,000 will be paying the additional 45p rate, bringing the total to 1.7m people. By 2028 the number of people paying the higher rate of tax will have reached 7.5m, roughly one in five of all taxpayers. Isaac Delestre, a research economist at the Institute for Fiscal Studies, said the number of people being dragged into the higher rates of tax had risen far more than predicted. “When it was originally announced in March 2021, the freeze to the personal allowance and higher rate threshold was expected to raise £10.2bn a year by 2028-29,” he said. “Now the freezes to the personal allowance and higher rate threshold alone will be adding £35.7bn a year to the total tax burden, relative to a world where they were indexed to inflation. While freezing thresholds is a perfectly valid way to raise taxation it is debatable whether it is a sensible policy when there is that much uncertainty over its impact.”