Jeremy Hunt will preside over an eye-watering hike in stealth taxes, despite pledging tax cuts from the dispatch box.
While the Chancellor confirmed a large cut to National Insurance rates – from 12 percent to 10 percent – the Treasury is reaping in billions through a policy of “fiscal drag”.
The Government is now being accused of “taking with one hand and giving back with the other”, as stealth taxes will secretly line the taxman’s pocket to the tune of tens of billions.
In March 2021, Rishi Sunak announced that tax thresholds would be frozen for four years, extended under Jeremy Hunt until 2027-28.
The policy means that millions of taxpayers are being dragged into paying higher levels of tax, as their wages increase.
According to the small print of today’s Autumn Statement, published by the Office for Budget Responsibility, the tax threshold freezes mean nearly four million additional British taxpayers will be expected to pay income tax.
Some three million more Brits will have been pushed into paying the higher rate of income tax, and 400,000 more will pay the top 45 percent additional rate of tax.
With 68 percent more taxpayers now paying the 40 percent rate, the Treasury’s income from the stealth tax will now amount to a whopping £44.6billion by the end of the OBR’s forecast in 2028-29.
This figure is an enormous increase of £13.6billion alone since the OBR’s last forecast in March this year.
While Jeremy Hunt announced a reduction in the basic rate of National Insurance, the impact of the primary threshold freeze will be a mere £180million.
The OBR says that frozen thresholds are “the largest contributor to the rising overall economy-wide tax burden” and is responsible for almost one third of the 4.5 percent GDP increase in taxes since 2019.
While today’s Autumn Statement will reduce the overall tax burden by 0.6 percent, the overall tax burden is up by 4.5 percent since Rishi Sunak became Chancellor in March 2020.
Responding to today’s announcements by the Chancellor, the free market think tank the Institute for Economic Affairs (IEA) slammed the Government for “essentially taking with one hand and giving back with another”.
IEA director Mark Littlewood said: “Amidst the rhetoric about tax reductions, this government is presiding over one of the heaviest tax burdens in the past seven decades.
“The frozen income tax thresholds amount to a stealth tax increase of around £40 billion annually by some estimates.”
They concluded today’s measures were a “step in the right direction towards lower taxes and economic growth, but not a leap”.
The Lib Dems also slammed the Chancellor, describing the stealth tax as the “Hunt Hoodwink”.
“This is a deception from Jeremy Hunt after years of cruel tax hikes on hard-working families from this government.
“Conservative chaos has sent mortgages and tax bills soaring, today’s announcements won’t even touch the sides.”
They add that even after today’s cut to National Insurance, the typical taxpayer on £35,000 will pay an extra £400 in tax next year due to frozen Income Tax and National Insurance thresholds.
A higher rate taxpayer earning over £65,000 will pay an extra £1,200 because of the fiscal drag.
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