As a result of the decision by Sunak and JHunt to freeze tax thresholds rather than letting them rise in line with inflation, someone who had just tipped into being a higher-rate payer could find themselves with an extra £500 tax bill
: “The higher rate is now hitting middle earners and inflation is making fiscal drag a real problem. Index linking thresholds affects the Government’s nominal income but not its real income so failing to increase them with prices is a conscious decision to increase tax as a share of GDP. I think this is a mistake and because of high inflation it is harder to hide.
Another ex-Cabinet minister added: “The 40 per cent rate was only meant to be paid by those earning the most – those earning over £85,000 today – but Labour decided to squeeze middle earners instead.proving that we have cut taxes for hardworking families – stopping people like middle-ranking policemen, experienced teachers and many junior doctors paying 40 per cent income tax.”
Isaac Delestre, research economist at IFS, said that the higher-rate tax level had gone from being something “reserved for only the very richest” to something that a large proportion of adults “could expect to encounter”.
The IFS said the freeze, which started in April, is set to become the single biggest tax-raising measure since the government doubledUnder the tax system, someone earning £50,000 per year would pay £7,486 in income tax and £5,316 inBut if they received a 6 per cent pay rise, and had their wage upped to £53,000, some of their earnings would be taxed at the higher rate, and they would pay an extra £1,146 in income tax, as well as an extra £124 in national insurance.
Combined, this means their take-home pay would only increase by £1,730, and this is without factoring in increased student loan costs, which many taxpayers also pay.
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