British households have faced a significant stealth tax burden of £12.41billion through the government's policy of maintaining frozen income tax thresholds, new data reveals.
HM Revenue and Customs collected £154.18billion in revenue during the six months from April to September this year.
This represents a substantial increase from the £141.77billion gathered during the identical period in the previous year.
The frozen thresholds, originally implemented by the Conservative government and set to continue until 2027-28, have resulted in workers paying considerably more tax despite no changes to headline rates.
Chancellor Rachel Reeves appears set to prolong the threshold freeze until 2029-30 when she delivers her autumn Budget next month, according to widespread expectations.
Analysis conducted by the Institute for Fiscal Studies suggests this extension would generate approximately £10.4billion in additional annual tax receipts for the Treasury.
The Chancellor faces a fiscal shortfall of up to £50billion whilst operating under strict self-imposed constraints. Her commitment to maintaining current rates for income tax, National Insurance, VAT and corporation tax leaves few alternatives for raising revenue.
Prolonging the threshold freeze would technically honour her pledge whilst securing substantial funds through this indirect taxation method.
'Stealth tax' warning as millions could be hit with a bill worth thousands
| GETTYGovernment estimates indicate that 520,000 additional individuals were pushed into the 40 per cent higher-rate tax band during the previous year as a result of the threshold freeze.
This phenomenon, known as fiscal drag, occurs when salary increases move workers into higher tax brackets despite unchanged threshold levels.
Rachael Griffin from wealth management company Quilter stated that Pay As You Earn income tax and National Insurance contributions remain "artificially inflated" due to frozen tax thresholds.
Millions of workers caught out by 'stealth tax raid'
| GETTYShe warned: "This doesn't point to a roaring economy but a sign of a Treasury increasingly reliant on extracting more from the same taxpayers."
The policy presents political complications for Ms Reeves, who had previously suggested reversing the freeze would be a key feature of her inaugural Budget.
Ms Griffin observed that "maintaining it would quietly preserve billions in extra tax revenue" despite the political difficulties this creates.
Experts have noted that ongoing speculation about potential income tax modifications has intensified recently
| GETTYSarah Coles from investment platform Hargreaves Lansdown noted that ongoing speculation about potential income tax modifications has intensified recently.
She commented: "There's every chance the thresholds could be frozen for longer, as this stealth tax fits within the Government's promise not to leave working people worse off, because it's a tax on pay rises.
"At the same time, it's clearly an incredible money-spinner."
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