The United Kingdom is bracing for its most substantial tax increase in over 50 years due to the combination of frozen personal thresholds and surging inflation, as per recent analysis.
The Resolution Foundation’s findings reveal that taxpayers are expected to contribute £40 billion by 2028, a significant increase from the £30 billion initially forecasted during Chancellor Jeremy Hunt’s budget announcement in March.
The government’s policy entails maintaining the freeze on income tax and national insurance thresholds until 2028, causing many individuals to fall into higher tax brackets.
The Institute for Fiscal Studies has also warned that this freeze will compound the financial challenges faced by workers whose incomes are failing to keep pace with inflation.
This development comes as Chancellor Jeremy Hunt ruled out substantial tax cuts for the current year, despite calls from the Conservative Party for a pre-election fiscal giveaway during their conference.
The Stealthy Rise in Taxation
Adam Corlett, principal economist at the Resolution Foundation, explained, “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.”
However, what sets this apart is the magnitude of the government’s stealth tax rise, reaching £40 billion.
This reality represents the largest and ongoing tax hike on incomes in at least half a century. Consequently, any discussions of pre-election tax cuts will inevitably be viewed within the broader context of these substantial tax increases.
The Treasury has been approached for comment on this matter.