Two million British workers face the prospect of paying 60 per cent of their income to the government in taxes as a result of the latest round of hikes by the supposedly conservative government which is also splashing out billions more on state employees’ pensions.
This week, Chancellor Jeremy Hunt, an anti-Brexit holdover from the David Cameron era who played the pivotal role in ousting Liz Truss and installing Rishi Sunak as Prime Minister, announced that he would be increasing taxes by another £24 billion, taking the tax burden to its highest level since the Second World War.
According to analysis of Hunt’s tax increases the NFU Mutual financial advice firm, that up to two million people will be subject to paying 60 per cent of their income in tax by the year 2028 as a result of inflation pushing their salaries into frozen higher tax bands, The Telegraph reports.
The finance firm noted that because those who earn between £100,000 and £125,140 do not benefit from the tax-free personal allowance afforded to other earners, they will fall into a trap in which six in ten pounds they earn above the threshold will go to the government.
Currently, around 1.3 million Britons earn above £100,000 — however, as a result of inflation, it is expected that 700,000 more taxpayers will be dragged into the band by the year 2028.
Sean McCann of NFU Mutual explained: “By then, the threshold will not have changed for 18 years – dragging increasing numbers of people into the higher marginal rate of tax as salaries increase to keep up with inflation.
“Income between £100,000 and £125,140 is effectively taxed at 60 per cent, and when you add in national insurance of 2pc this means that only £38 of every £100 earned between these amounts ends up in the employee’s pocket. That means you lose £15,587 in tax and national insurance on the £25,140 of earnings over £100,000.”
Meanwhile, as a result the tax hikes and lost economic growth due to the looming recession, British workers are expected to lose some £15,000 in pay rises on their real income over the next five years, according to the Resolution Foundation, which predicted that wages won’t return to their 2008 levels until 2027.
The economic disaster befalling the country will also see average living standards for Britons fall at the fastest rate on record, dropping by a predicted seven per cent over the next two years.
Despite the hit to the wallets of average citizens, however, the government is expected to splash out nearly 150 per cent more on so-called “gold-plated” pension expenditures for public sector workers, as inflation has triggered the largest pension pay hike in decades.
As such pensions rise every spring in accordance with the previous year’s inflation in September, which stood at over 10 per cent, billions more will be needed to keep payments in line with that figure.
According to the state Office for Budget Responsibility (OBR), the government will likely need to spend £3.3 billion over the next year on pensions for government employees, and this will jump to £6.2 billion in 2023/24 and then £8.2bn in 2024/25 — meaning that former bureaucrats may stand to benefit more than most from the economic crisis, which the government has blamed on Ukraine but was arguably largely self-inflicted.
Although Chancellor Hunt touted spending cuts in his autumn budget, the reality is that governmental spending is still set to be £90 billion higher in real terms by 2027/28 than in the 2019/20 fiscal year.
Richard Tice, leader of Reform UK — formerly the Brexit Party — said that the tax hikes and the increased spending in real terms demonstrates that the Conservative government is presiding over nothing more than a “form of socialism”.
Mr Tice said that the government should be implementing financial policies aimed at “reducing spending, reducing waste and creating growth by lowering taxes and getting rid of unnecessary regulations” but “have reversed from all of that”.
Follow Kurt Zindulka on Twitter here @KurtZindulka
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