Stealth tax rises

Posted on 29 Jan 2014
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OBR: 1.3m more people to start paying income tax Figures from the Office for Budget Responsibility show an extra 1.3m people will have to start paying income tax over the next five years, while a further 1m will be pushed into higher rate taxation. With the Chancellor announcing that thresholds at which the tax starts being paid will be frozen until 2026 after an increase next month, the OBR estimates that up to 2.3m people will pay more tax, with this totalling more than £8bn. The OBR said tax rises set out in the Budget would increase the tax burden from 34% to 35% of GDP in 2025/26 – the highest level since the late 1960s. Meanwhile, a budget report from the Institute for Fiscal Studies (IFS) estimates that an extra 3% of adults will end up having to pay income tax by 2026, while the proportion of higher rate taxpayers is to rise from 8.7% to 11%. IFS analysis shows one in six people will be paying the higher income tax rate by next year. The report also shows that while the tax change was progressive - hitting higher earners disproportionately more than lower earners - an increase in the overall income tax rates would have been even more progressive. Paul Johnson, director of the IFS, said the income tax threshold freezes will hit middle England.

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