Targeted support for the squeezed middle must be a priority for the government’s tax policy makers

Nimesh Shah Blick Rothenberg CEO says

“Arguably, the impact of higher taxes is most profound with the ‘squeezed middle’, where more people than ever have been dragged into 40% income tax and felt particular pain of measures like the High-Income Child Benefit Charge.”

The present parliament has raised UK tax levels more than any other since records began, according to analysis from the economic think tank, the Institute of Fiscal Studies (the ‘IFS’).

The IFS concludes that the UK tax burden, as a percentage of GDP, has increased from 33% to 37%. This represents the highest increase in taxes since World War II.

The freezing of the allowances and tax thresholds, which is confirmed to run until 2028, has undoubtedly been the most effective form of tax-raising measures. This is the equivalent of increasing basic rate income tax by 4%.

Annual UK tax revenues are now over £800bn – An £150bn increase on two years ago when the UK was starting to ease its lockdown measures.

He added:

“The conclusion from the IFS is hardly surprising – the Covid support measures alone cost the government £300bn, and the size of the National Debt, at £2tn, is almost the size of the entire UK economy. It seemed inevitable that taxes had to increase, as the impact of Covid in some respects was more severe on the economy than World War II as productivity and output ground to a halt. However, the UK’s tax take as a percentage of GDP is reasonably average when compared to other developed countries – Denmark, Sweden and Finland, for example, have much higher tax burdens. Unfortunately, and given the current economic situation, it doesn’t seem likely that the present or next government can sustainably reduce taxes – however, targeted support for the ‘squeezed middle’ must be a priority for the government’s tax policymakers as this demographic has also been hit with soaring interest rates and cost of living pressures.”

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