Tax impact of freeze

Posted on 17 Jun 2014
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The government’s freeze on income tax thresholds will see some tax bills rise by the equivalent of a 3.5% hike in the headline rate of tax

Someone on a salary of £50,000 will pay just under £59,000 in income tax over the six years of the threshold freeze.The total tax bill will be more than £9,000 higher than it would have been if tax thresholds had been uprated with inflation during that time, illustrating the damaging effect of fiscal drag on earnings.Analysis showed that the basic rate of income tax would have to have risen by 3.5% to 23.5% to raise the same amount of tax from a £50,000 earner.The stealth tax rise does not only hit higher earners, as the average £33,000 earner will also see an equivalent 2% increase to a base rate of 22%.

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