Official data shows that the number of people forced to pay income tax in Britain has risen by an estimated 4,4 million in just three years due to the government’s freezing of thresholds. This statistic is likely re-ignite the tax debate in the UK ahead of the election.
According to the figures, a continued freeze on income tax thresholds – seen by some as a sneaky tax – has pushed an additional 1,77 million pensioners in the income tax bracket.
The Conservative Party has stated that it will keep the thresholds in place until 2028. However, it has promised to increase personal tax allowances for pensioners.
HMRC data indicates that there will be 37,4 million tax payers in 2024-25. This is up from 33 millions in 2021-22 when the personal income tax thresholds had been frozen.
This includes 8.5 millions taxpayers over the age of state pension, which is 26% higher than the figure 6.7 million in 2021-22.
This statistic will be used by the Conservatives to promote their tax offer for pensioners known as “triple-lock plus”. The Conservatives would use this statistic to tout their tax offer to pensioners, known as the “triple lock plus”
Labour has not committed itself to this policy. Labour has said that it will stick to its current plan to keep tax thresholds the same until 2028.
Rishi Sunak has repeatedly claimed that people will pay more taxes under Labour. Keir and his team have said they won’t raise income tax, VAT or national insurance, arguing that the Conservative manifesto lacks funding.
The Institute for Fiscal Studies, a think-tank , said this week that it deliberately avoided focusing on hard fiscal decisions to be made regardless of who wins.
Commentators have said that the freezing of tax thresholds is forcing more low-income families to pay basic-rate taxes, which start at an income of £12570 per year. The higher 40% tax rate, which begins in England, Wales, and Northern Ireland at £50.270 per year, is also being pushed up by increasing numbers of people.
Tax experts and critics have called this phenomenon “fiscal dragging” a sneaky tax.
In total, there will be 29.5 million basic-rate taxpayers in 2024-25, an increase of 2.1 million from 2021-22. The number of UK higher rate taxpayers increased from 4.4 to 6.31million in the same time period.
Sarah Coles is the head of personal finances at Hargreaves Lansdown. She said, “The agonising effects of fiscal drag and reductions to dividend allowances have been made clear, as millions of people are paying more tax and billions more pounds in profits.”
Steve Webb, former minister of pensions, said that the numbers relating to pensioners showed that the tax thresholds had been frozen, and the pensions have increased significantly. This has led to a “continued increase” in the number pensioners who pay tax.
Webb, a partner in the actuarial firm LCP, explained that this is a continuation of a long-term trend, whereby the number of people over 65 who pay tax has increased by 4 million since 2010. He said that being a British pensioner who pays income tax is no longer the exception but the norm.
According to a LCP analysis, just under 2.5 million pensioners receive state pensions that, by themselves, exceed the personal tax allowance. It said that the majority of them were older pensioners who received the basic pension and also qualified for “additional pensions” (also known as state earnings-related retirement pension scheme or state second pension).
Rachael Griff, tax and financial planner at wealth management firm Quilter said: “This Morning’s Statistics from HMRC reveal that the Conservative government has been implementing a stealth tax agenda. The number of people who are being pushed into higher and additional tax brackets continues to rise as a result frozen tax thresholds, and the impact of fiscal drag.
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