Chancellor Jeremy Hunt has admitted the Tories will keep his "stealth tax" on working-age people in place until 2028 in a move critics claim will see four million more Britons handing over their hard-earned cash to HM Revenue and Customs (HMRC).
During the Autumn Statement 2022, Hunt confirmed tax allowances would be frozen until 2028, extending now-Prime Minister Rishi Sunak's freeze on the tax-free personal allowance and higher rate thresholds.
This comes after the Conservative Party's announcement of the "triple lock plus" policy in an attempt to woo older voters before the country heads to the polls for the General Election on July 4.
If the Tories win this summer's General Election, the tax-free personal allowance for pensioners will rise in line with the the triple lock to prevent older Britons paying tax on their state pensions.
The policy would see state pensioners protected from the impact of fiscal drag, when tax allowances remain at the same rate during a period when wages are rising. As a result, taxpayers are dragged into higher brackets and pay more to the taxman.
This proposal has been widely criticised as working-age people, so far, do not appear to be receiving any respite from the effects of fiscal drag which research indicates could dent personal finances by £4,000 in just three years' time.
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Fiscal drag is dragging Britons into higher tax brackets GETTY Speaking to the BBC this morning, the Chancellor said: “The tax rises that happened as a result of the pandemic and the energy shock, these two giant shocks, will stay for their allotted time period.
"I can absolutely undertake that the threshold freeze that we introduced until 2028 will not continue after that.”
Earlier this year, the rate employees pay National Insurance was slashed to eight per cent for 27 million workers in a tax cut estimated to save Britons £450 annually.
However, thanks to Hunt's "stealth tax", experts are warning this is the fiscal equivalent of "giving with one hand and taking away with the other".
Tom Selby, the director of public policy at AJ Bell, explained: “Working families might understandably feel more than a little aggrieved that, having committed to ending the personal allowance freeze for pensioners, Rishi Sunak and Jeremy Hunt are not making a similar pledge for younger people.
"If tax thresholds remain frozen until 2028, millions of Brits will be pulled into paying substantially more income tax through ‘fiscal drag’. This works in exactly the opposite direction to the National Insurance reductions announced by the government, not to mention the hints at further National Insurance cuts to come.
“The Conservatives are effectively giving with one hand by lowering National Insurance and taking away with the other through the stealth tax of frozen thresholds.
"Creating a different personal allowance for pensioners will also complicate the tax system and add unfairness between generations. This all adds up to a pretty incoherent approach to income tax and National Insurance policy which seems to be driven entirely by a desire to win over older voters ahead of the General Election."
Earlier today, both Labour and the Conservatives promised their respective parties would not raise VAT if they were given the keys to Number 10, with National Insurance and income tax cut hikes also ruled out.
This suggests the freeze on income tax allowances will continue to be used a primary revenue generator for HMRC for the foreseeable future.
LATEST DEVELOPMENTS:
Jeremy Hunt is continuing the freeze on tax allowances until 2028
PAThe Office for Budget Responsibility (OBR) forecast that Hunt's "stealth tax" will pull nearly four million additional taxpayers into higher tax threshold by the 2028-29 tax year.
Selby added: "These numbers would be a bit lower if the Conservatives were to win the election and introduce the quadruple lock for pensioners, but crucially working age people would still be left at the mercy of extreme fiscal drag.
“A consequence of frozen thresholds combined with rising wages, the stealth tax increase will see many households pay thousands more in income tax than they would have done had thresholds been indexed in line with inflation.
"Had the personal allowance, currently frozen at £12,570, been inflation linked since 2021/22 when the freeze was implemented, then it would be forecast to rise to £15,989 by 2028 – nearly £3,500 higher than if the deep freeze remains. "
