One in five pulled into higher tax bands

Analysis of official figures by pensions consultancy Lane Clark & Peacock (LCP) shows that one in five workers will be paying higher or top-rate tax by the next general election. A combination of fast-growing wages and a freeze in the point at which workers start paying higher levels of tax will see around 2.5m taxpayers dragged into rates of 40% or 45%. The report shows that a record 6.78m workers will be paying higher rates by 2024 – 58% more than at the last general election in 2019. The Sunday Times says the analysis is “likely to heap pressure” on the Prime Minister and the Chancellor, while MP David Davis described the number of people being dragged into the highest tax bracket as “hugely concerning”, adding: “People didn’t elect us to increase their taxes.” Mr Davis warned: “It’s a real risk now that the party is going to lose its reputation for economic competence.” Steve Webb, a partner at LCP and a former pensions minister, said: “Freezing tax allowances and thresholds is the ultimate stealth tax — no minister has to announce a rise in tax rates, but tens of millions of people pay more tax and millions of those will be dragged into higher tax bands.” “This is certainly not a transparent way of raising extra tax revenue,” he added.

 

The Sunday Times

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