An extension to the stealth tax on workers’ incomes could end up costing some high earners more than £600 per year by the end of the decade, analysis for The i Paper has found.
Economists think that the Chancellor might resort to extending a threshold freeze on tax bands – a form of stealth tax – to help balance the books in the Autumn Budget.
The rates at which people start paying the basic, higher and additional rates of tax were frozen under the previous Government in 2022, but the freeze is set to expire in 2028.
square SAVING AND BANKING Mortgage rates could rise if cash ISA allowances are cut, experts say
Read More
At the last Budget, Rachel Reeves announced that the Government would not extend the freezes past 2028, but a swathe of high-profile U-turns by the Government in the last month has prompted speculation that tax increases could be coming – and a threshold freeze may be on the cards.
Someone earning a roughly average salary of around £30,000 could end up paying an extra £106 in income tax and national insurance in 2028/29 and an extra £214 in 2029/30 if the threshold freeze were to be extended, calculations from wealth manager Quilter show.
Someone on £60,000 would pay an extra £317 in 2028/29 and an extra £643 the following tax year.
But a higher earner, on £150,000, would pay an extra £354 in 2028/29 and an extra £718 the following tax year.
The salary at which people start paying the basic rate of tax, as well as national insurance, is £12,570. The basic rate of income tax above this salary threshold is 20 per cent.
The higher rate of tax, which applies to £50,271 to £125,140, is 40 per cent. The additional rate of tax, which applies to over £125,140, is currently 45 per cent.
These would typically increase alongside inflation, but have not done so for several years, and will not do so again until 2028 under current plans.
Quilter’s calculations work on the basis of inflation averaging 3 per cent over the next five years, and the worker getting 5 per cent annual pay increases.
The table below shows the extra tax people at different salary levels would pay in 2028/29 and 2029/30 if the thresholds were frozen in those years.
Freezing thresholds are regarded as a stealth tax because they increase people’s taxable income without tax rates actually increasing – a process known as “fiscal drag”.
Increasing the amount paid into the Treasury’s coffers in this way could allow Labour to claim it is not breaking its key manifesto promise of not raising taxes on “working people”.
At the last Budget, Reeves said she planned to increase the thresholds from 2028.“From 2028-29, personal tax thresholds will be uprated in line with inflation once again. When it comes to choices on tax, this Government chooses to protect working people every single time,” the Chancellor said.
But the Treasury has, in recent weeks, repeatedly refused to rule out prolonging the freeze on income tax thresholds.
Read More Details
Finally We wish PressBee provided you with enough information of ( How much a stealth-tax extension could cost you – depending on your salary )
Also on site :
- Rough start dooms SB Foresters
- Top Western firms switching to Chinese AI – WSJ
- Bonita business owner, 85, pleads guilty to $5.8 million Medicare fraud