Rishi Sunak’s record tax rise to cost workers £40bn
Higher-rate taxpayers will pay £3,700 more a year as thresholds are frozen amid high inflation
new
Chris Smyth, Whitehall Editor
Friday October 06 2023, 3.00pm BST, The Times
The freeze in income tax thresholds, which began when Rishi Sunak was chancellor, has been extended until 2027/28
Rishi Sunak is imposing the biggest income tax rise on record as soaring inflation imposes a £40 billion raid on taxpayers, according to new analysis.
Higher rate taxpayers will be handing over £3,700 a year more in tax as a result of the prime minister’s six-year freeze to income tax thresholds, the Resolution Foundation has calculated.
The stealth tax will raise more than twice as much as originally thought because of high inflation, the think tank estimates.
The findings will intensify calls from Tory MPs for tax cuts, after more than 30 of them signed a pledge this week not to vote for any more tax rises.
However, Jeremy Hunt, the chancellor, has said reducing tax is “incredibly unlikely” in the short term because high inflation has also added tens of billions to the cost of servicing government debt.
As chancellor in 2021, Sunak announced a four-year freeze on the thresholds at which people start paying income tax and the point at which the 40p rate kicks in, both of which normally rise with inflation. In the aftermath of Liz Truss’s disastrous mini-budget, Sunak and Hunt extended the policy to 2027-28 and also froze the threshold for employer National Insurance.
At the time this was projected to raise about £14 billion. This was later revised to £26 billion by the Office for Budget Responsibility, which estimated that the freeze would drag 2.1 million people into the higher rate.
However, inflation has remained far higher than previously thought and, using the latest Bank of England estimates, Resolution now calculates that the threshold freeze will raise £40 billion a year by 2027-28.
“Abandoning the usual uprating of tax thresholds is a tried and tested way for governments of all stripes to raise revenue in a stealthy way,” Adam Corlett, principal economist at the Resolution Foundation, said.
“But it is the far bigger-than-anticipated scale of the government’s £40 billion stealth tax rise that stands out. The reality of the largest, and ongoing, tax rise in at least 50 years is why any talk of pre-election tax cuts will inevitably be seen in the wider context of some far bigger tax rises.”
If thresholds had risen with inflation, people would not start to pay income tax until they earned £16,200, instead of £12,570, meaning they will pay an extra £720 in tax.
Jeremy Hunt warned Tory MPs that talk of tax cuts was “slightly academic” as debt interest repayments have soared
The 40p rate threshold, currently £50,270, would have risen to £65,000 with inflation, the foundation says. This means higher rate tax payers in 2027-28 will be paying an extra £3,700 as a result of the freeze.
In 2026 prices, the £40 billion tax rise exceeds increases of more than £30 billion in the aftermath of Black Wednesday in the early 1990s and anything going back to the start of comparable records in 1970.
The Institute for Fiscal Studies has previously said Geoffrey Howe’s doubling of VAT in 1979 was marginally bigger than Sunak’s tax rise, at £46 billion in 2026 prices, although the foundation said that could yet be beaten if inflation stayed even higher than forecast.
Hunt told the Conservative party conference this week that talk of tax cuts in the autumn statement was “slightly academic” because “our debt interest payments have gone up so much in the last six months that I think it’s incredibly unlikely we’d have any headroom to do anything like that”.
At present Britain spends more than £100 billion a year on debt interest, and estimated payments have gone up £23 billion since March as a result of rising interest rates.
The Treasury said: “We have also taken three million people out of paying tax altogether since 2010 through raising personal thresholds, and the chancellor has said he wants to lower the tax burden further, but has been clear that sound money must come first.”
Higher rate taxpayers should be paying a lot more and the lower threshold should be raised.
The real problem is for what? All the councils are going broke, projects are getting cancelled, benefits aren’t tracking inflation, NHS is a shambles, schools are crumbling etc etc. We’re paying record amounts and getting less as a result. Its just another sign of the incompetence of this government. We had 12 years of virtually 0% interest and decided that wasn’t the time to invest in infrastructure, housing, healthcare or the rest and we had to have austerity. We’re now at 5-6% interest on bonds and can’t afford to invest in anything. Its just a joke tbh.
And yet business owners will pay them selves minimum wage and use the dividends loophole
What I can’t understand is how after 13 years of the Tories we have record high taxes and record high immigration. Utterly bizarre.
Raising them so they can cut them again just before the election
Politics in this country is all so fucking miserable. If anyone else is feeling as hopeless as I am just remember that there is far more to life than some twats who dont care about anything but money. Health, family and friends are whats really important. Also its a friday and work is ending so go have a beer, we deserve it.
Thanks Rishsi, you know how to kick a man when he’s down, don’t you.
He needs to be toppled.
I don’t mind tax as long as that £40bn has something to show for it. Better public services, infrastructure, council services, policing, standards of living, etc.
I know it won’t do much to dictator Sunak but we can only try.
11 comments
Rishi Sunak’s record tax rise to cost workers £40bn
Higher-rate taxpayers will pay £3,700 more a year as thresholds are frozen amid high inflation
new
Chris Smyth, Whitehall Editor
Friday October 06 2023, 3.00pm BST, The Times
The freeze in income tax thresholds, which began when Rishi Sunak was chancellor, has been extended until 2027/28
Rishi Sunak is imposing the biggest income tax rise on record as soaring inflation imposes a £40 billion raid on taxpayers, according to new analysis.
Higher rate taxpayers will be handing over £3,700 a year more in tax as a result of the prime minister’s six-year freeze to income tax thresholds, the Resolution Foundation has calculated.
The stealth tax will raise more than twice as much as originally thought because of high inflation, the think tank estimates.
The findings will intensify calls from Tory MPs for tax cuts, after more than 30 of them signed a pledge this week not to vote for any more tax rises.
However, Jeremy Hunt, the chancellor, has said reducing tax is “incredibly unlikely” in the short term because high inflation has also added tens of billions to the cost of servicing government debt.
As chancellor in 2021, Sunak announced a four-year freeze on the thresholds at which people start paying income tax and the point at which the 40p rate kicks in, both of which normally rise with inflation. In the aftermath of Liz Truss’s disastrous mini-budget, Sunak and Hunt extended the policy to 2027-28 and also froze the threshold for employer National Insurance.
At the time this was projected to raise about £14 billion. This was later revised to £26 billion by the Office for Budget Responsibility, which estimated that the freeze would drag 2.1 million people into the higher rate.
However, inflation has remained far higher than previously thought and, using the latest Bank of England estimates, Resolution now calculates that the threshold freeze will raise £40 billion a year by 2027-28.
“Abandoning the usual uprating of tax thresholds is a tried and tested way for governments of all stripes to raise revenue in a stealthy way,” Adam Corlett, principal economist at the Resolution Foundation, said.
“But it is the far bigger-than-anticipated scale of the government’s £40 billion stealth tax rise that stands out. The reality of the largest, and ongoing, tax rise in at least 50 years is why any talk of pre-election tax cuts will inevitably be seen in the wider context of some far bigger tax rises.”
If thresholds had risen with inflation, people would not start to pay income tax until they earned £16,200, instead of £12,570, meaning they will pay an extra £720 in tax.
Jeremy Hunt warned Tory MPs that talk of tax cuts was “slightly academic” as debt interest repayments have soared
The 40p rate threshold, currently £50,270, would have risen to £65,000 with inflation, the foundation says. This means higher rate tax payers in 2027-28 will be paying an extra £3,700 as a result of the freeze.
In 2026 prices, the £40 billion tax rise exceeds increases of more than £30 billion in the aftermath of Black Wednesday in the early 1990s and anything going back to the start of comparable records in 1970.
The Institute for Fiscal Studies has previously said Geoffrey Howe’s doubling of VAT in 1979 was marginally bigger than Sunak’s tax rise, at £46 billion in 2026 prices, although the foundation said that could yet be beaten if inflation stayed even higher than forecast.
Hunt told the Conservative party conference this week that talk of tax cuts in the autumn statement was “slightly academic” because “our debt interest payments have gone up so much in the last six months that I think it’s incredibly unlikely we’d have any headroom to do anything like that”.
At present Britain spends more than £100 billion a year on debt interest, and estimated payments have gone up £23 billion since March as a result of rising interest rates.
The Treasury said: “We have also taken three million people out of paying tax altogether since 2010 through raising personal thresholds, and the chancellor has said he wants to lower the tax burden further, but has been clear that sound money must come first.”
Higher rate taxpayers should be paying a lot more and the lower threshold should be raised.
The real problem is for what? All the councils are going broke, projects are getting cancelled, benefits aren’t tracking inflation, NHS is a shambles, schools are crumbling etc etc. We’re paying record amounts and getting less as a result. Its just another sign of the incompetence of this government. We had 12 years of virtually 0% interest and decided that wasn’t the time to invest in infrastructure, housing, healthcare or the rest and we had to have austerity. We’re now at 5-6% interest on bonds and can’t afford to invest in anything. Its just a joke tbh.
And yet business owners will pay them selves minimum wage and use the dividends loophole
What I can’t understand is how after 13 years of the Tories we have record high taxes and record high immigration. Utterly bizarre.
Raising them so they can cut them again just before the election
Politics in this country is all so fucking miserable. If anyone else is feeling as hopeless as I am just remember that there is far more to life than some twats who dont care about anything but money. Health, family and friends are whats really important. Also its a friday and work is ending so go have a beer, we deserve it.
Thanks Rishsi, you know how to kick a man when he’s down, don’t you.
He needs to be toppled.
I don’t mind tax as long as that £40bn has something to show for it. Better public services, infrastructure, council services, policing, standards of living, etc.
I know it won’t do much to dictator Sunak but we can only try.
https://petition.parliament.uk/petitions/641904
> Higher-rate taxpayers will pay £3,700 more a year as thresholds are frozen amid high inflation
also
> From [Gov.UK](https://www.gov.uk/income-tax-rates)
> Band | Taxable Income | Tax Rate
> :——–|:——–|:——–
> Higher rate | £50,271 to £125,140 | 40%
Oh no!
Anyway…