Britain’s stealth taxes hoover up £241 billion from working people as 6.5 million pay higher rates of income tax
- Number of people paying at higher rates of tax up from 5million two years ago
Britain’s stealth taxes are hoovering up £241billion from working people – including 6.5million who are now in the highest income tax bands.
The number of people paying at the higher rate of 40 per cent and ‘additional’ rate of 45 per cent is up from 5million two years ago when thresholds were frozen.
New figures lay bare the scale of the Treasury cash grab as 2.5million more people are dragged into paying income tax overall. The total tax take is nearly £40billion more compared with two years ago.
Those paying the 40 per cent higher rate and 45 per cent additional rates of income tax will contribute an additional £31billion more in 2023/24 than in 2021/22, according to figures from HM Revenue and Customs.
Millions of middle-income workers are being pushed into paying rates originally intended for wealthy or super-wealthy individuals.
Those paying the 40 per cent higher rate and 45 per cent additional rates of income tax will contribute an additional £31billion more in 2023/24 than in 2021/22, according to figures from HM Revenue and Customs
Former Tory leader Iain Duncan Smith said he was not surprised by the figures, saying: ‘They are now punishing people who are not wealthy – senior teachers, nurses, ordinary people trying to make a living. We are unnecessarily gathering too much tax. With prices rising, it’s a double whammy’ (File Photo)
Lenders ratchet up mortgage costs
A slew of major lenders including Nationwide and Halifax have intensified the squeeze on mortgage holders with further rate rises.
TSB, HSBC, Barclays, Natwest and Virgin Money have also been raising or are about to raise borrowing costs.
It adds to the pain for first-time buyers and home movers, who have already seen average rates on two-year fixed term deals surge above 6 per cent – with five-year deals now looking likely to hit that level soon.
Adding to evidence of the wider cost of living squeeze, Bank of England data published yesterday showed households withdrew £3.8billion from their savings in May, the most since records began 25 years ago. Mortgage rates have been rising sharply in expectation that the Bank will keep hiking interest rates to tackle stubbornly high inflation.
Figures from financial website Moneyfacts yesterday showed the average two-year fixed rate deal had hit 6.37 per cent, while the average for five-year deals had reached 5.94 per cent.
The chaos has prompted predictions of a house price crash. Economists at the firm Oxford Economics expect prices to steadily fall by 13 per cent over a couple of years.
With the number of taxpayers paying the 45p higher rate reaching 862,000 this year, former pensions minister Sir Steve Webb said: ‘There’s every chance we could see a million people paying the highest rate of tax next year. That’s quite a seismic change in the tax system.’
By failing to uprate tax bands in line with inflation, workers are being punished simply for receiving annual wage increases, even though in most cases they do not cover the rising cost of living.
Former Tory leader Iain Duncan Smith said he was not surprised by the figures, saying: ‘They are now punishing people who are not wealthy – senior teachers, nurses, ordinary people trying to make a living. We are unnecessarily gathering too much tax. With prices rising, it’s a double whammy.’
The figures illustrate starkly the growing weight of Britain’s tax burden, which is heading for its highest level as a proportion of GDP since the Second World War.
The threshold freeze means that since April 2021, workers have had to start paying basic rate tax of 20 per cent on incomes above £12,570 and a higher rate of 40 per cent for earnings over £50,270. An additional rate of 45 per cent applies on salaries above £125,140.
The number of people paying income tax is expected to hit 35.3 million in the current 2023/24 financial year. That is up from 34million in the previous financial year. Total income tax take will climb to £241billion, up from £224billion a year earlier. Gareth Davies, Exchequer Secretary to the Treasury, said: ‘We want taxes to come down but we are in a very challenging position.
‘We’ve provided unprecedented levels of support to businesses and consumers whether its through Covid or the energy crisis and so obviously that needs to be paid for.’