An extra 3 million working people across the country will be
paying income tax due to 'fiscal drag', as they find themselves
caught in the freeze that has been squeezing families for
years.
The analysis comes as many workers will be receiving their first
pay packet today since the Government’s Autumn Statement changes
to NICs. The changes have been challenged by the Labour Party as
the Government has raised taxes 25 times since coming to
government.
The additional tax hike comes after the Tory Government last year
promised the “largest ever tax cut for workers” after announcing
a two percentage point cut to the main rate of National
Insurance. However, income tax and national insurance thresholds
have been frozen under and since 2022/23, leaving millions
more Brits paying a higher rate of tax.
Since the last election, there have been 25 Tory tax rises. Even
after the reduction in National Insurance Contributions, the
Institute for Fiscal Studies has said that this will be the
“biggest tax-raising parliament in modern times… [and will] not
stop tax revenues rising to their highest ever levels.”
, Labour’s Shadow Chief
Secretary to the Treasury, remarking on government’s NIC changes,
said:
“Under Rishi Sunak’s Raw Deal, for every extra £10 people are
paying in tax they are only getting £2 back.
“Working people know from the money in their pocket that this is
just a tax con from a Tory party desperate to cling onto power
rather than fix their cost of living crisis.
“It's time for change. We need an election now to give the
British public the chance to vote for a changed Labour Party that
will change Britain for the better.”
Ends
Notes
The Office for Budget Responsibility state that the value of the
freezes to personal tax thresholds this Parliament will be worth
the equivalent of a 10p increase in the main rate of NICs by
2028/29. The Government is cutting NICs by 2p from 6 January.
“This measure offsets just under a quarter of the post-pandemic
personal tax rises that were announced between March 2021 and
November 2022, which we now estimate will raise a combined £44.6
billion in 2028-29 (by way of comparison, this is broadly
equivalent, in revenue terms, to a 10 percentage point increase
in the main rate of Class 1 NICs). This is almost 50 per cent
higher than our estimate in March and is driven by higher
earnings growth bringing more individuals into the scope of the
measures, which include the multiyear freezes in the income tax
personal allowance, the income tax higher-rate threshold, and
both employer and employee NICs thresholds.”
Chart A in the OBR document shows that there will be more than 3
million additional income taxpayers in 2024/25 due to government
policy to freeze tax thresholds.
Source: https://obr.uk/docs/dlm_uploads/E03004355_November-Economic-and-Fiscal-Outlook_Web-Accessible.pdf
