Freeze Shock: Rishi’s Mega Stealth Tax Will Drag 4 Million Lower Rate Taxpayers Into 40% Band

New research out from the Centre for Economics and Business Research’s Douglas McWilliams, calculates that Chancellor Rishi’s freezing of tax allowances and upper rate thresholds in the March 2021 Budget will, as a result of inflation being much higher than forecast, now mean:

“that by the fiscal year 2025/26 the number of people paying tax, which was 32.2 million in 2021/22, could rise by 5 million and perhaps even more damagingly the number of people paying higher rate tax at 40% will virtually double from 4.1 million to 8.1 million. This is a £40 billion tax rise originally planned to raise £8.2 billion.”

This £40 billion will be in addition to the £20 billion to be raised by NI hikes announced as the Health and Social Care Levy. That hike was voted through Parliament. The impact of unexpectedly high inflation on the freezing of allowances and bands was not voted for, yet it will likely double the impact of the higher NI rate. This is Rishi’s mega-stealth-tax…

The Treasury this afternoon argues that the Osborne-era above-inflation threshold rises mean that even with this freeze, taxpayers will still be ahead:

“We’ve got the most generous basic personal tax allowance in the G20 and maintaining the threshold is progressive and will ensure nobody’s take home pay will be less than it is now in cash terms.”

Take-home pay will of course be less in real terms after inflation, in addition millions of former lower rate taxpayers will now be paying tax at 40%. The threshold freeze will also go a long way to reversing the policy of the coalition government, which took 2 million low-paid taxpayers out of the tax net altogether. How the Treasury reckons bringing the lowest paid into the tax net is progressive is not clear. Guido suspects the Chancellor will eventually use the revenue raised from this stealth tax to cut the NI hike back before the general election. Using a massive stealth tax to finance cutting back taxes the Chancellor raised won’t be clever, it will be bribing us with our own money.

mdi-timer 21 February 2022 @ 15:30 21 Feb 2022 @ 15:30 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
UK Economic Growth Slows in Q3

According to the ONS, the UK economy grew by just 1.3% between July and September which is down on the previous quarter. The level of real quarterly GDP in the UK is still 2.1% below where it was before the coronavirus pandemic at the end of 2019. Though there was strong consumer spending in the third quarter, expansion was weaker than expected. 

mdi-timer 11 November 2021 @ 08:36 11 Nov 2021 @ 08:36 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
UK Already Experiencing High-Wage Growth as Salaries for Drivers, Builders and Nurses Soar

The high-wage, high-growth economy Boris envisioned in his speech yesterday is already upon us according to data released this morning. New figures from the recruitment firm Indeed reveal that some occupations have already seen a huge growth in their wages. Driven arguably more by the post-pandemic recovery than Brexit…

Drivers have seen their wages spike by a whopping 8.5%. Construction workers have seen a similarly impressive 8% growth in their wages. Those working in production and manufacturing have seen their wages boom by 5.1% whilst nurses, loaders and stockers have seen wages increase by over 4%. However most other jobs have seen growth rate of 1.4% since January which is fairly typical. Keep a wary eye on inflation…

mdi-timer 7 October 2021 @ 13:00 7 Oct 2021 @ 13:00 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
UK Housing Market Booming, Economy Set for Rapid Bounce Back

The UK housing market saw record high of 183,000 transactions in March, with the average house price rising to £242,832 and the market seeing a complete revival after the steep decline during the first lockdown. Economic growth, meanwhile, is also now accelerating to near-record highs, with growth now forecast at 7.2% – up from the 5.1% predicted back in December. National incomes are also expected to return to pre-pandemic levels by next spring. The sun is out and the sky is blue…

7.2% growth would put the UK ahead of all but China and India in terms of recovery, with the US expecting 6.9%, and the EU on 4.3%. Reacting to the figures, the Chancellor Rishi Sunak said:

“Our plan for jobs is working. It’s great to see some early signs that the UK is bouncing back from the pandemic but with debt at nearly 100 percent of GDP we must also ensure public finances remain on a sure footing.”

Things are looking promising, though this is all before furlough ends and tax hikes kick in…

mdi-timer 1 June 2021 @ 08:58 1 Jun 2021 @ 08:58 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
UK Jobs Market “Broadly Stable” as Unemployment Dips Under 5%

New figures from the Office of National Statistics (ONS) show that the UK’s unemployment rate dipped to 4.9% in the three months to February, down from 5% in the previous data. ONS director of economic statistics Darren Morgan says:

“The latest figures suggest that the jobs market has been broadly stable in recent months after the major shock of last spring. The number of people on payroll fell slightly in March after a few months of growth.

There are, though, over 800,000 fewer employees than before the pandemic struck, and with around five million people employed but still on furlough, the labour market remains subdued.”

Figures released last week also showed the economy returning to growth in the same period to February, so today’s data is another encouraging sign – especially as more vacancies open up in areas like hospitality as lockdown is lifted. Of course, with five million people still on furlough heading into the summer, there’s a long road to recovery… 

mdi-timer 20 April 2021 @ 09:02 20 Apr 2021 @ 09:02 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
UK Economy Returns to Growth as EU Exports Rebound

The UK economy grew by 0.4% in February despite the national lockdown restrictions, new figures show. Figures released by the Office for National Statistics show that the economy is beginning to stabilise after GDP fell by 2.2% in January (initially pinned at 2.9%), buoyed by a record uptick in retail sales, advanced manufacturing activity, and construction. Obviously good news, although overall the economy is still 7.8% smaller than its pre-pandemic level.

Still, there was more for Guido to cheer in the ONS’s data: total UK exports to the EU shot up by 46.6% (£3.7 billion) from January, with the number of UK-build car exports matching pre-pandemic levels from February 2020. Exports of food and livestock also rose by 77%. As expected, businesses are adapting to the UK’s new relationship with the EU – who could’ve guessed?

mdi-timer 13 April 2021 @ 08:46 13 Apr 2021 @ 08:46 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
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