One million to be 'stealth' driven into higher UK tax rate amid financial squeeze

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One million to be 'stealth' driven into higher UK tax rate amid financial squeeze

Analysis by the House of Commons Library has found that an extra 1.2 million people will be driven into the 40p higher rate UK tax band, against the backdrop of a steep rise in the cost of living.

The analysis, commissioned by the Liberal Democrats, found that an extra 1.2 million people will be pushed into the 40p higher rate tax band - which starts at £50,070 - by 2026 than if the Government were to raise that threshold in line with forecast inflation to £56,270.

Meanwhile, an extra 1.5 million low paid earners will move into the 20p basic tax rate, which starts at £12,570, than if the personal allowance threshold rose in line with forecast inflation to £14,070 over the next four years.

While the Treasury's plan to freeze income tax thresholds will be felt by over a million workers, there are steps employees can take to mitigate this."

These income tax threshold freezes, attacked as a stealth tax raid, will collectively cost families in England, Wales and Northern Ireland almost £11bn by 2026, the research found.

The policy is forecast to cost the average household an extra £430 a year by then.

Andrew Tully, technical director, Canada Life, said: "While the Treasury's plan to freeze income tax thresholds will be felt by over a million workers, there are steps employees can take to mitigate this.

"One solution for those on the higher tax rate tipping point who may have received a pay rise and be unaware of the implications of the frozen bands could be to pay a voluntary additional contribution to their pension - if they can afford it."

He added: "However, given the looming cost of living crisis, this may not be for everyone. This is because employees are effectively reducing or deferring their salary now for retirement later on - although they can reduce contributions in the future should they need extra income today."

Christine Jardine, the Liberal Democrat Treasury spokesperson called on the UK Government to "drop this unfair stealth tax that will clobber families who are already feeling the pinch".