More than a million workers are expected to move into the top tax bracket over the next four years, it was claimed last night.
Analysis from the House of Commons Library suggests that the Treasury’s decision to freeze the personal tax abatement and the higher-rate tax threshold until 2026 will push 1.2 million workers’ incomes into the d ‘imposition of 40p.
Experts warn it will exacerbate a “cost of living catastrophe” as workers also face increased national insurance and rising energy costs.
Last night, the Liberal Democrats said the Tories’ “stealth tax raid” would “hit families” as household bills are already skyrocketing.
The Treasury’s decision to freeze the personal tax abatement and the higher rate tax cutoff until 2026 will push 1.2 million workers’ income into the 40p tax rate. Pictured: Chancellor Rishi Sunak
Backbenchers have warned the Chancellor that the 1.25% increase in national insurance that goes into effect in April will increase pressure on family finances
Backbenchers have warned the Chancellor that the 1.25% increase in national insurance that comes into effect in April will further strain the family finances.
Commons leader Jacob Rees-Mogg called for its removal at a Cabinet meeting this week.
Households are hit by rising inflation and heating bills, and the energy price cap – which sets the maximum price for 15 million customers on standard variable tariffs – is expected to be raised in April.
Economic experts added last night to warnings about the pressures facing families grappling with the soaring cost of living.
Yesterday, Conservative MPs and business leaders urged the Chancellor to reverse the tax hike. But Mr Sunak backed the plan, saying, “It’s always easy to avoid tough decisions, but I don’t think it’s the responsible thing to do.”
Paul Johnson, director of the Institute for Fiscal Studies, told the Telegraph that people were facing a crisis this year that “could well be worse than the financial crisis.”
Torsten Bell of the Resolution Foundation think tank added, “April in particular is going to be a cost-of-living disaster, and the year as a whole will be defined by the squeeze.”
The freeze will also mean that an additional 1.5 million low-wage people will be forced to pay income tax.
Regional figures shared by the Lib Dems show London and the South East are expected to be hardest hit by the stealth tax, with an average income of £ 500 per household.
Paul Johnson, director of the Institute for Fiscal Studies, told the Telegraph people were facing a cut this year that “could well be worse than the financial crisis”
In all regions, household disposable income is estimated to be 1% lower in 2025/2026 than it would be had there not been a freeze on income tax thresholds.
This equates to £ 430 per household.
Last night, the Liberal Democrats called on the government to drop the planned “stealth tax raid” which “will hit families who are already feeling the pinch.”
Christine Jardine, spokesperson for the Liberal Democrat Treasury, said: “People are worried about the cost of living rising and paying their bills this winter.
“Now they face years of tax increases under a Conservative government that takes them for granted.”
Yesterday, Conservative MPs and business leaders urged the Chancellor to reverse the tax hike. But Mr Sunak backed the plan, saying, “It’s always easy to dodge tough decisions, but I don’t think it’s the responsible thing to do.”
Backbenchers have warned the Chancellor that the 1.25% increase in national insurance that comes into effect in April will further strain the family finances. Commons leader Jacob Rees-Mogg called for its removal at a Cabinet meeting this week
Last month, Brexit Minister Lord Frost resigned from Cabinet, citing high taxes as one of his main concerns.
Craig Mackinlay, of the Net Zero Scrutiny Conservative MP group, said it was “not too late” for the Chancellor to change his mind.
He added: “With the cost of living crisis even more acute today due to a sharp increase in energy bills, increasing the pressure on households with an increase in national insurance will only do so. add to family and inflationary pressures. “
Conservative MP Andrew Bridgen said the Chancellor would come under “increasing pressure” to remove the NIC hike. He suggested that the Tories could suffer in the May local election if the government does not act.
Labor, meanwhile, accused the Tories of trapping the country in a “cycle of high taxes and low growth”.
Shadow Chief Treasury Secretary Pat McFadden said: “The Conservatives’ hike in national insurance and other tax hikes leave working people with the heaviest tax burden in 70 years.
“They trap us in a cycle of high taxation and low growth that we need to get out of. Ministers could ease the burden now by reducing VAT on household energy bills.
The Federation of Small Businesses also urged the Chancellor to remove the tax hike. Mike Cherry, its national president, said, “Companies that pay thousands of dollars extra in energy costs shouldn’t have to hand over more to the tax authorities – just to keep employing their staff.”
Baroness Altmann, former Pensions Minister, said the NIC hike was a “separate injustice” to the energy hike, but urged the government to reverse the planned increase anyway.
Adam Scorer, chief executive of National Energy Action, an energy poverty charity, urged the government to first expand provisions like the Warm Home Discount Scheme and the Winter Fuel Payment – which reduce fuel bills. people’s energy.