The highest tax burden in 70 years could take a generation to fully address
Government needs to develop a strong tax cutting Budget in advance of the general election, and nothing should be off the table
Given the mounting pressure from within and outside of Government, Jeremy Hunt and Rishi Sunak need to develop a strong tax cutting Budget in advance of the next General Election.
Nimesh Shah, CEO said: “A report published by the Institute of Fiscal studies suggests that one in five taxpayers have been dragged into higher rate income tax because of frozen tax allowances.
“Nurses, teachers and pensioners who would not have got close to 40% income tax a decade ago are facing a greater tax burden than ever before; and under the continued cloud of record levels of inflation.”
He added: “Despite the economic shock of Liz Truss and Kwasi Kwarteng’s disastrous Mini Budget last September, nothing should be ‘off the table’ and the Chancellor should be considering measures to support workers and families including –
– Unfreezing the personal tax allowances and thresholds so they are increased in line with inflation.
– Abolishing the High-Income Child Benefit charge or raising the threshold to £150,000.
– Restating the personal allowance for everyone (where it is currently clawed back for those earning more than £100,000.)
– Abolish the pension annual allowance taper when someone’s income reaches £260,000.”
“In my view, the IFS’ findings are not surprising, and we have been building up to this for over a decade, with regular tinkering to personal tax allowances and thresholds since the Coalition Government.”
He added: “In 2010 the personal allowance was £6,475 and the higher rate threshold was £43,875; in 2023, the personal allowance is £12,570 and the higher rate threshold is £50,270 – an increase of just under £6,400, or put another way, around £500 a year. Jeremy Hunt committed to keeping the higher rate threshold at this level until 2028 raising over £25 billion for HM Treasury.
“The effect of frozen allowances is the equivalent of increasing basic rate income tax to 23.5% – therefore any pre-election tax cutting measures from the Government would need to be dramatic to restore any sort of parity.”
“A family of four with one working parent earning £62,000 are £367 better-off in 2023 than they were in 2010, when factoring in the child benefit clawback, but completely ignoring inflation.”