Millions of people will pay more tax over the next six years after Jeremy Hunt announced his plans in the Autumn Statement.
The Chancellor of the Exchequer announced that he will freeze the income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds until April 2028. This means that more people will pay more tax as a result of “fiscal drag” as wages increase.
The thresholds for both income tax and national insurance are set at £12,570. They were already frozen for four years to April 2026, but this will now be stretched to April 2028.
READ MORE: Christmas in doubt as city looks to plug £73m blackhole
At the moment, you pay the basic 20% rate of Income Tax and 12% in National Insurance contributions when you earn above £12,570. The freezing of tax brackets is known as a stealth tax, as more people are pulled into paying higher tax as wages and prices rise, while the tax bands stay the same.
Mr Hunt said his decisions lead to a “substantial tax increase” but said he was not raising headline rates of taxation, adding tax as a percentage of GDP will increase by 1% over the next five years.
On personal taxes, Mr Hunt said he would reduce the threshold at which the 45p rate becomes payable from £150,000 to £125,140.
He said: “Those earning £150,000 or more will pay just over £1,200 more a year” and added: “We are also taking difficult decisions on tax-free allowances. I am maintaining at current levels the income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds for a further two years taking us to April 2028. Even after that, we will still have the most generous set of tax-free allowances of any G7 country.”
The Chancellor said he would also reform allowances on unearned income, noting: “The dividend allowance will be cut from £2,000 to £1,000 next year and then to £500 from April 2024. The annual exempt amount for capital gains tax will be cut from £12,300 to £6,000 next year and then to £3,000 from April 2024.
"These changes still leave us with more generous allowances overall than countries like Germany, Ireland, France, and Canada.”
Receive newsletters with the latest news, sport and what's on updates from the Liverpool ECHO by signing up here
READ NEXT:
Love Island's Luca Bish appears to take subtle dig at Gemma Owen in break-up post
Mum 'stressed beyond belief' as dream garden turns into 'absolute mess'
Teen beaten to death in internet café after gang 'called in' by boy, 14
Friends served chicken nuggets for breakfast on 'five star' TUI trip
Taxi driver 'knew something was wrong' after question to Liverpool hospital bomber
