The United Kingdom is on the brink of experiencing its most substantial tax hike in half a century, driven by the decision to freeze personal thresholds and the surging inflation rate. According to the Resolution Foundation, taxpayers are projected to contribute a staggering £40 billion annually by 2028, a significant increase from the £30 billion estimated during Chancellor Jeremy Hunt’s budget announcement in March.
The government’s strategy involves maintaining the freeze on income tax and national insurance thresholds until 2028. This move comes as Chancellor Hunt dismissed the possibility of significant tax cuts this year, despite calls from the Tory party for a pre-election giveaway at the Conservative Party conference. Adam Corlett, the principal economist at the Resolution Foundation, highlighted that abandoning the customary adjustment of tax thresholds has historically been a subtle method for governments to boost revenue. However, the unprecedented scale of the government’s £40 billion stealth tax rise is raising concerns. This substantial and ongoing tax increase on incomes marks the most significant in at least half a century, putting any talk of pre-election tax cuts into perspective as part of a broader context of substantial tax rises.
A spokesperson from the Treasury defended the government’s stance, stating, “Our tax burden remains lower than any major European economy, despite the tough decisions made to restore public finances following the pandemic and Putin’s illegal invasion of Ukraine.” The spokesperson emphasized the government’s commitment to reducing inflation, seen as the most effective form of tax reduction at present. The government is steadfast in its plan to halve inflation, prioritizing this approach over borrowing money to fund tax cuts. Furthermore, the government has successfully lifted three million people out of the tax bracket entirely since 2010 by raising personal thresholds. Chancellor Hunt has expressed his intention to further reduce the tax burden, with the caveat that maintaining fiscal responsibility is paramount.