Stealth tax raid on middle class: Two million people dragged to higher pay levels as Rishi Sunak faces demands for tax cuts
- One in five taxpayers is expected to soon pay the rate of 40 or 45 percent
- Chancellor Rishi Sunak last year froze income tax thresholds until 2026
- About 6.1 million are expected to pay the maximum rate this year, almost double that of 2010
By Victoria Bischoff and John Stevens for the Daily Mail
Posted: 22:35, 30 June 2022 | Updated: 00:34, July 1, 2022
Rishi Sunak faced growing pressure to set a timetable for tax cuts last night after millions of middle-class families were hit by higher bills.
A furtive tax raid has seen nearly two million more people dragged into higher income tax brackets since the last election.
The total will increase even more, with one in five taxpayers soon expected to pay the 40 or 45 percent rate.
Last year, Chancellor Sunak froze income tax thresholds until 2026, a measure criticized as a pay cut in real terms for millions of families already affected by rising cost of living.
Rishi Sunak faced growing pressure to set a timetable for tax cuts last night after millions of middle-class families were hit by higher bills. A furtive tax raid has seen nearly two million more people dragged into higher income tax brackets since the last election
About 4.3 million people were paying the 40p plus or 45p income tax rate. additional when Boris Johnson won the 2019 general election.
It is now projected to rise to a record 6.1 million this year, almost double that of 2010.
Experts warned that it could reach more than seven million by 2024, meaning one in five taxpayers would have higher rates, an increase of about 70 percent in this parliament, according to pension consultancy LCP.
He caused Conservative MPs to call for tax cuts as fears grew that the party was losing its low-tax reputation.
The point is that the starting point of the higher tax has not kept pace with the increase in revenue. The five-year freeze on thresholds turbocharged this trend, creating a “fiscal drag.”
And with wages and pensions rising rapidly with inflation, things are likely to get worse.
About 4.3 million people were paying the 40p plus or 45p income tax rate. additional when Boris Johnson won the 2019 general election. It is now projected to rise to a record 6.1 million this year, almost double that of 2010.
LCP partner Sir Steve Webb, a former pension minister, said: “The payment of higher taxes used to be reserved for the richest, but that has changed.
“People who don’t consider themselves particularly wealthy can easily face a 40 percent income tax rate.”
Conservative MP Mel Stride, chairman of the Commons Treasury Committee, said the chancellor had only a “limited” margin for tax cuts until inflation eased, but added: “At the time, I would wait. that it is approaching a serious step to achieve the tax.charge. ‘
Conservative MP Marcus Fysh said: “We should raise the threshold of the highest rate far beyond the income scale instead of dragging more and more middle-income people into it.”
Sarah Coles, senior personal finance analyst at online agent Hargreaves Lansdown, said: “With the thresholds frozen until 2026, we will see a steady stream of taxpayers crossing the thresholds and paying spectacular tax levels.”
He added: “Intense inflation and frozen tax thresholds will bring the income tax to an incredibly painful £ 251 billion, almost a third in three years … and it will get worse.”
There were 31.5 million people paying personal income tax in 2019/2020. According to HMRC, it is expected to increase from 2.5 million to 34 million in 2022/2023.
About 80 percent pay the basic tax rate of 20 percent. Those with the highest rate of 40% are expected to reach 5.5 million in fiscal year 2022/2023, up 44% in three years.
The number of people collecting a 45% income tax is expected to increase by almost half to 629,000 over the same period.
The tax-free personal allowance is £ 12,570. The 40 per cent higher rate applies to salaries of £ 50,270 or more, and the additional rate of 45 per cent to £ 150,000. The latest data from the National Statistics Office show that average wage growth was 6.8% year-on-year.
So someone with £ 47,500 last year would be included in the highest tax bracket, according to AJ Bell’s calculations.
When asked if the government would cut taxes next year, Boris Johnson said: “Next month we will have a tax cut worth £ 330 on average for national insurance payers. It will be a substantial tax reduction “.
But Paul Johnson, of the think tank at the Institute for Tax Studies, said it was a “fairy tale” to think the government could cut taxes given its spending pressures.