Rishi Sunak is poised to unveil stealth tax rises next week which could raid £35billion from Brits every year.
Experts issued the warning as the PM considers extending a freeze on tax thresholds in Thursday’s Autumn Statement.
The £12,570 Income Tax and National Insurance thresholds are already being frozen for four years to April 2026.
Now the Chancellor is looking at extending this to April 2028, it’s understood.
The move would add £5bn to a £30bn windfall already being raised by the four-year freeze, the Institute for Fiscal Studies told the Mirror.
It would mean all six years of freezes net the Treasury £35bn a year by 2028.
This is called “fiscal drag” - because more people are dragged into paying higher tax as wages and prices rise.
IFS Senior Economist Stuart Adam told the Mirror: “Whether people attribute it to government-imposed tax rises or not, their incomes will be lower and their living standards will be lower.”
Mr Adam warned the £35bn estimate depends on inflation returning to 2% in the mid-2020s.
If it does not, the stealth tax raid would be even higher.
When the four-year freeze on thresholds was announced last year, it was thought it would raise £8bn a year by 2026.
But soaring inflation - which means wages overtake the limit more quickly - pushed that estimate up to £18bn and then £30bn.
The IFS’s £35bn figure includes all freezes on income tax thresholds, including the £50,270 level where the 40p tax rate kicks in.
It also includes the freeze on the “upper earnings limit” in National Insurance, but not a freeze in the £12,570 National Insurance threshold.
This is because the National Insurance threshold is new - and almost £3,000 a year higher than what it was before.
When Rishi Sunak introduced the new National Insurance threshold in July, he boasted it was the “single biggest tax cut in a decade”.
But the IFS warned it will be almost entirely wiped out by 2026 - as the level of tax catches up to what it would have been anyway.
Mr Adam told the Mirror: “The fact the National Insurance threshold will now be frozen, rather than going up with inflation for the next three years, will essentially erode the gain people had when it went up in July.
“It will end up in more or less the same place as if they had never increased it in July, and just put it up with inflation each year instead.”
Mr Adam warned the stealth grab will be “striking” adding: “People’s after-tax incomes will be lower than they would otherwise have been.”
Torsten Bell of the Resolution Foundation told the FT “people may not have noticed”, but the freezes will be “the biggest tax rises of all”.
