Millions more working Britons will be forced to pay the tax rate meant to impact the super-wealthy in one of the largest tax hikes in half a century by Prime Minister Rishi Sunak’s poorly-named Conservative Party.
According to research conducted by The Institute for Fiscal Studies (IFS) one in five taxpaying adults in Britain will be artificially hit with tax rates originally created for the super wealthy as a result of Rishi Sunak in 2021 freezing the salary at which people begin paying income tax at £12,570 and the higher rate at £50,270 for six years. The move was then extended to 2028 by Sunak’s finance chief Jeremy Hunt last year.
The process, dubbed fiscal drag, means that tax thresholds do not raise along with inflation, resulting in people who were previously in lower bands being unjustly dragged into higher tax brackets.
According to the IFS, in 1991-92 just three per cent of British adults paid the 40 per cent tax rate. Still, as a result of Sunak’s economic policies, this will climb to 14 per cent by 2027, representing some 7.8 million people or 20 per cent of the expected 38 million taxpayers.
The study noted, that a generation ago, nearly no nurses paid the 40 per cent tax rate, but over one in eight nurses will be hit with the excessive tax rate by 2027. The IFS went on to forecast that a quarter of electricians, machinists, and teachers be hit by the 40 per cent band by 2027, compared to around one in twenty in the early 1990s.
Despite laughably claiming to be a “Thatcherite” small-government Tory, Prime Minister Sunak’s stealth tax agenda will see 2.1 million more people dragged into the higher tax rate, according to the Office for Budget Responsibility (OBR), which will increase taxes by some £26 billion a year.
This IFS said that this would represent the largest tax increase since the 1970s, and would be “significantly bigger” than the already controversial raise of the corporation tax to 25 per cent by the government last month.
The author of the report, Isaac Delestre said that the increase in people paying the 40 per cent tax rate will see “a fundamental and profound change to the nature and structure of our income tax system”.
“The freeze to thresholds is supercharging that process… Whether or not the scope of these higher rates should be expanded is a political choice as much as an economic one, but achieving it with a freeze leaves the income tax system hostage to the vagaries of inflation.”
Sunak, who is estimated to be wealthier than King Charles III, has come under criticism for being out of touch as he levied the highest tax burden on the public since World War II during a cost of living crisis. Upon coming into office last year, Sunak argued that it was necessary to pay off the debts accumulated during the Chinese coronavirus crisis — when he paid businesses to remain shut and workers to stay home.
The PM also claimed that keeping taxes high would have a deflationary effect on the economy, however, nearly eight months later, inflation remains in double digits and among the highest in Europe.
The issue of sky-high taxes ushered in under the allegedly Conservative government will likely become increasingly heated ahead of next year’s planned general election. Indeed, with the Tories being clobbered in the council elections earlier this month, losing over 1,000 seats, and seeing Labour becoming the largest party at the local level in England, concerns are already being raised about the high-tax and open borders agenda of Sunak’s government.
Former housing secretary Simon Clarke told The Times: “This analysis shows the worst is yet to come. We need to cut spending and taxes to ease the pressure on family finances and we need to have a moment of levelling with the public that our current economic trajectory is simply unsustainable.
“That needs to begin before the next election and we need to set out a clear plan to bring income tax rates down and unfreeze the thresholds at which people pay the different rates so as to reflect the stealth effects of inflation.”
Follow Kurt Zindulka on Twitter here @KurtZindulka
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