Frozen tax bands to put 7.7million in 40% top rate bracket by stealth
6th October 2022

Frozen tax bands will put 7.7million in 40% top rate bracket by stealth, analysis suggests

  • Over 7.7million people will pay the 40 per cent higher rate of income tax by 2025
  • Analysis comes a day after Liz Truss sought to reinforce her low-tax credentials 
  • ‘Giving with one hand and taking with the other is opaque and stealthy’

More than seven and a half million people will be paying the 40 per cent higher rate of income tax by 2025, according to analysis that lays bare the impact of stealth taxes. 

Freezes in tax and benefit thresholds will swipe £2 from households for every £1 in personal tax giveaways in Kwasi Kwarteng’s mini-Budget, a report by the Institute for Fiscal Studies showed. 

The analysis comes a day after Liz Truss sought to reinforce her low-tax credentials in a speech to the Conservative Party conference. 

Former chancellor Rishi Sunak had set Britain on course for its highest tax burden in 70 years. 

Thresholds for paying income tax are typically increased in line with inflation. But Mr Sunak announced last year they would be frozen for four years – and Mr Kwarteng has done nothing to change that. 

Freezes in tax and benefit thresholds will swipe £2 from households for every £1 in personal tax giveaways in Kwasi Kwarteng’s mini-Budget, a report by the Institute for Fiscal Studies showed

It means that as pay increases with inflation, employees are dragged into higher tax bands – even though earnings are not going up in real terms. 

When Mr Sunak announced the policy in 2021 it was expected to add £8billion a year to tax revenues by 2025. But because inflation has since surged, the boost for the Treasury is anticipated to reach £30billion. 

The threshold for paying 40 per cent income tax has been frozen at £50,271. The IFS said that will mean 7.7million people will pay tax at 40 per cent by 2025, 1.6million more than today. It will cost higher-rate taxpayers around £3,000 per year at today’s prices. 

Report author Tom Wernham said: ‘Giving with one hand and taking with the other in this way is opaque and stealthy.’

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