As per a major think tank, Britons will be forced to pay the highest rate of income tax in years to come, resulting in the greatest tax-raising effort in Britain since the beginning of former Prime Minister Margaret Thatcher’s administration.
According to the Independent Institute for Fiscal Studies (IFS), 14%, or 7.8 million adults, are expected to pay income tax of more than 40% on some of their incomes in the financial year 2027/28, which has surged from 11% in 2022/23 and 3.5% in 1991/92.
Currently, many are paying 20% income tax on income over £12.570 or $15,865 and 40% over £50,270, with a higher excess annually.
To rebuild the public finances after the government borrowed significant sums during the COVID-19 epidemic, Prime Minister Rishi Sunak and Finance Minister Jeremy Hunt decided to freeze the thresholds in November until 2028.
The value-added tax rate was roughly quadrupled to 15% under Geoffrey Howe, Thatcher’s chancellor of the exchequer at the time, in 1979. The freeze, which went into effect in April 2022, was the single greatest revenue-raising policy since that time, according to the IFS.
As per an economist from IFS Research, Isaac Delestre, the recent increase in inflation is driving up many workers’ nominal wages and putting them in a higher tax band.
In the 2019 election manifesto, the Conservative Party pledged to refrain from increasing income tax rates.
Sunak and Hunt’s budget move came after a turbulent economic situation was created due to the plan for £45 billion in unfunded tax cuts proposed by former Prime Minister Liz Truss and her Financial Minister Kwasi Kwarteng.
The IFS admitted that a major contributor of public sector workers, like nurses and teachers, is now participating in industrial action over wages and working conditions, which is expected to increase their tax rates.
It further stated that the freeze will also put a squeeze on living standards.
The IFS stated: “A third of the expected record fall in household incomes this year is likely to be a result of this tax rise.”
The national election is anticipated to be held next year, as Sunak stated that he wants to cut taxes when the opportunity arises.
- Published By Team Timeswire