“Stealth taxes” will cost Britons more than £7.5bn this year as inflation spirals and tax brackets are frozen in place.
The cost of living crisis has already gnawed through workers’ pay increases, and now families will be coughing up even more.
As people’s pay packets increase in line with sky rocketing prices, more workers will be dragged into higher tax bands, after the Chancellor froze tax thresholds.
Brits are also having to pay higher levels of inheritance tax and stamp duty as property prices rise, as the thresholds on those taxes are also frozen.
The Centre for Economics and Business Research (Cebr) has found these tax threshold freezes will cost families a grand sum of £7.5bn.
The frozen income tax brackets will earn the Treasury an extra £40bn by the 2025/26 financial year, according to the CEBR.
Twenty percent of workers will be in the top tax band by the next general election due to the threshold freeze and rising wages, as reported yesterday in The Sunday Times.
Former Tory leader Iain Duncan Smith told the Telegraph: “We have to cut taxes now. The only way to resolve the tough situation that households find themselves in is to cut taxes.
“Our system has delivered more tax revenue to the Government than we ever anticipated. We don’t need to raise national insurance… we need to put some money back into people’s pockets.”
Mr Duncan Smith warned the economy could be stung by a cocktail of modest growth and high inflation – otherwise known as stagflation.
“The Government is stuck in this ludicrous Treasury orthodoxy of thinking that every time they cut taxes, they need to cut spending somewhere. But they have headroom”, Mr Duncan Smith said. Rishi Sunak rules out emergency Budget to ease cost-of-living crisis
During the 2022/23 financial year, families will fork out another £3.1bn in income tax, according to the CEBR.
In a warning from the Bank of England, inflation will soon top 10 percent, a rate not seen in 40 years.
In an atypical assault on the Bank of England’s means of tackling the crisis, Business Secretary Kwasi Kwarteng complained that it was “an issue” that the Bank has not curbed high inflation.
Inflation is currently at 7 percent, 5 percent higher than the 2 percent target.