Millions of workers and pensioners face a brutal assault after Rachel Reeves today extended the hated ‘stealth raid’ in her Budget.
The Chancellor is set to keep the long-running freeze on personal tax thresholds in place for another three years beyond 2028.
It means the income tax personal allowance will remain at £12,750 until 2030-31.
And the higher rate and additional rate thresholds will remain at £50,270 and £125,140, respectively, over the same period.
The Office for Budget Responsibility (OBR), which took the blame for a leak of Ms Reeves’ Budget measures before she announced them, said the move would raise around £8billion a year.
The long-running freeze to tax thresholds will mean an extra 5.2 million Britons are paying income tax between 2022-23 and 2030-31.
Over the same period, 4.8million more taxpayers will have moved to the higher 40p rate, and 600,000 more to the additional 45p rate.
The OBR watchdog found the three-year extension to the freeze announced by Ms Reeves on Wednesday meant an extra 780,000 more basic rate income tax payers by 2029/30.
There will also be 920,000 more higher rate and 4,000 more additional rate income tax payers in 2029/30 due to the Chancellor’s latest action, it added.
The Chancellor is set to keep the long-running freeze on personal tax thresholds in place for another three years beyond 2028
The long-running freeze to tax thresholds will mean an extra 5.2 million Britons are paying income tax between 2022-23 and 2030-31
The extended freeze to tax allowances and thresholds between April 2021 and April 2031 is estimated to raise a total of £67billion.
It will also likely mean millions of pensioners having to pay income tax over the coming years.
This is because, under the terms of the ‘triple lock’, the state pension is set to soon be worth more than £12,570 per year.
It will mean the Government is effectively giving to pensioners with one hand, while taking with the other.
The Institute for Fiscal Studies think-tank has said the move to freeze tax thresholds breaks the spirit and letter of Labour’s manifesto, which promised not to raise taxes on ‘working people’.
It also flies in the face of Ms Reeves’ own words at the Budget last year, when she made a point of saying she would stand by the commitment to end the freeze.
The policy has been in place since April 2021, and has proved one of the biggest tax-raisers in UK history as wages have risen sharply to keep pace with inflation.
Andrew Prosser, head of investments at InvestEngine, said: “Rachel Reeves has confirmed frozen income tax thresholds will now extend to 2031.
‘This isn’t just a technical tweak, it’s a stealth tax. By 2031, well over a million people will pay income tax, with higher-rate taxpayers creeping up to more than 10 million.
‘If you’re near the £50,270 threshold, just a couple of decent pay rises could push you from 20 per cent to 40 per cent tax.
‘For higher earners, this policy could see half a million more people fall into the £100,000 tax trap, where every extra £2 earned costs £1 of your personal allowance, effectively a 60 per cent tax rate.’