Rishi Sunak accused of imposing £21bn ‘stealth tax’ on UK workers
Rishi Sunak has been accused of using a “stealth tax” on incomes that will bring in more than double the amount he budgeted for, as the cost of living rises at the fastest rate for three decades.
Ahead of the chancellor’s spring statement to the House of Commons next week, the Institute for Fiscal Studies said rapidly rising inflation means the Treasury could raise £13bn more than anticipated by freezing the income tax personal allowance and higher rate threshold.
It said the four-year freeze, announced by Sunak at the spring budget last year, had been expected to bring in £8bn for the exchequer by dragging millions of workers into paying more tax.
However, the Treasury estimate was based on a far lower inflation rate than now forecast amid Britain’s unfolding cost-of-living emergency. With a dramatic rise in energy bills pencilled in for this April and Russia’s invasion of Ukraine driving up gas prices to record levels, the IFS said freezing the income tax thresholds would now bring in £21bn for the public purse.
Paul Johnson, the director of the IFS, said: “With much higher inflation forecasts, it looks like being a massive £21bn tax rise – two-and-a-half times bigger than intended.”
<p lang=«en» dir=«ltr» xml:lang=«en»>That means that the policy is now expected to be a £21bn tax rise – on top of next month’s NICs rise (£13bn). This underlines the danger with freezing thresholds for long periods: unexpected changes in inflation can make the policy much bigger or smaller than initially intended. pic.twitter.com/TShlcqtDwPUnder the plan announced last spring, the personal allowance – the level above which workers start paying income tax – will be frozen at £12,570 from the beginning of next month until 2026.
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