Millions of Britons face a ‘monstrous’ and ‘absurd’ £40 billion stealth tax bombshell due to a little-noticed measure imposed by Rishi Sunak.
Pressure is mounting on the Chancellor to abandon his looming four-year freeze on income tax thresholds and to raise them in line with inflation instead.
The findings of an exclusive study by the Centre for Economics and Business Research for The Mail on Sunday show that more than nine million workers will be forced to pay more tax due to the freeze.
It comes on top of higher energy bills and other increases, including a 1.25 per cent hike in National Insurance.
Five million lower-paid workers will be pulled into the tax net over the next four years, according to the CEBR analysis.
These current non-taxpayers will have to stump up 20 per cent of a slice of their earnings.
Meanwhile, four million more Britons will be dragged into the 40 per cent higher rate tax band.
CEBR deputy chairman Douglas McWilliams said: ‘It is absurd. This stealth tax rise should be reversed.’
In a widely overlooked measure in his Budget last year, Mr Sunak put a standstill on personal income tax allowances and thresholds from April this year until March 2026.
Normally they are upgraded each year so that after-tax pay is not unfairly eroded purely due to inflation.
The Chancellor imposed the freeze before the recent rise. Consumer price inflation has subsequently soared to 5.5 per cent – its highest for 30 years.
As a result of the frozen allowances, millions of workers will face a ‘double squeeze’ just as National Insurance and household bills rise.
Basic rate tax at 20 per cent is levied on incomes of more than £12,570 a year.
The higher rate of 40 per cent kicks in at £50,271 and the rate of 45 per cent is charged on incomes above £150,000.
The think-tank predicts that the wage hikes will generate an extra £40 billion in tax for the Treasury.