Frozen tax thresholds add to pressure on families struggling

Rishi Sunak’s £7.5bn ‘stealth’ tax raid: Frozen thresholds add to pressure on families already struggling with cost of living crisis

  • Chancellor Rishi Sunak has frozen tax thresholds across the board in ‘stealth tax’
  • This means as pay rises with soaring prices than workers are in high tax brackets
  • Rising property prices also mean more in inheritance tax and stamp duty

Britons are set to pay more than £7.5billion in ‘stealth taxes’ this year amid soaring inflation and tax bracket freezes. 

Families already seeing wage rises eaten away by the cost of living crisis will be contributing even more to the Treasury’s coffers. 

Chancellor Rishi Sunak has frozen tax thresholds across the board, meaning that as pay rises to keep track with soaring prices, more workers will be pulled into higher tax brackets. 

Rising property prices are also forcing Britons to pay higher levels of inheritance tax and stamp duty, as thresholds on those levies have also been frozen. 

These stealth taxes will cost families a total of £7.5billion this year alone, the Centre for Economics and Business Research (CEBR) has found. 

Chancellor Rishi Sunak (pictured) has frozen tax thresholds across the board, meaning that as pay rises to keep track with soaring prices, more workers will be pulled into higher tax brackets

Supporting families through the cost-of-living crisis is Boris Johnson’s No1 priority, the PM’s policy chief insists. 

Andrew Griffith, director of the No10 Policy Unit, accepted that many of the Government’s proposals to address soaring bills were longer-term measures. 

But he insisted Mr Johnson was determined to help families in the short term – such as through the council tax rebate and cut to fuel duty. 

He told The Daily Telegraph: ‘What you’ve got to look at with a Queen’s Speech and a legislative programme, particularly in year three of the Government, is what are the things that are going to make a difference. Potentially some are in the medium and longer term and that’s about building the right foundations for future growth. There are other things that we’ve done that speak much more directly to the cost of living. It is people’s No1 priority. It’s the Prime Minister’s No1 priority.’ 

Mr Griffith also said he believed ‘individuals spend money on balance better than governments do’, adding: 

‘People should keep more of what they earn. That provides the incentive for people to be in employment and to take control as much as they can of their lives.’ 

It comes as Labour frontbencher Ed Miliband suggested the Chancellor will impose a windfall tax on energy giants to help families deal with the cost-of-living crisis. 

Labour will put forward an amendment to the Queen’s Speech in the Commons tomorrow for a one-off windfall tax on oil and gas firms’ bumper profits. 

Over the next four years, the amount of ‘extra’ tax taken by the Treasury will increase exponentially, as even more people get pulled into higher tax brackets. 

By the 2025/26 financial year, frozen income tax brackets alone will make an extra £40billion for the Treasury, CEBR found.

One in five workers will be paying the higher or top rate of income tax by the next general election due to the freeze in thresholds and rising wages, The Sunday Times found yesterday. 

Former Tory party leader Sir Iain Duncan Smith said: ‘We have to cut taxes now. The only way to resolve the tough situation that households find themselves in is to cut taxes.

‘Our system has delivered more tax revenue to the Government than we ever antici – pated. We don’t need to raise national insurance… we need to put some money back into people’s pockets.’ He warned the economy could suffer a bout of ‘stagflation’, when low growth is accompanied by rocketing prices. 

Sir Iain said: ‘The Government is stuck in this ludicrous Treasury orthodoxy of thinking that every time they cut taxes, they need to cut spending somewhere. But they have headroom.’ 

The CEBR calculated that in the 2022/23 financial year households will pay an extra £3.1billion in income tax. 

Mr Sunak has also frozen inheritance tax thresholds, which would usually rise in line with inflation, until 2026.

Families will now end up giving greater proportion of their inherited estate to the Government. 

Recent data from the Office for National Statistics showed the Treasury made £6.1billion through inheritance tax in 2021/22 – 15 per cent more than a year ago and well over double the amount 20 years ago. 

The Bank of England warned earlier this month that inflation will soon peak at a 40-year high of more than 10 per cent. 

And yesterday Business Secretary Kwasi Kwarteng warned it is clearly ‘an issue’ that the Bank has failed to tackle high inflation. 

In an unusual attack by several senior ministers on the Bank’s approach, he said inflation must be reduced from 7 per cent to the 2 per cent target. 

Source: Read Full Article