Higher rate taxpayers will be handing over £3,700 a year more in tax as a result of the prime minister’s six-year freeze to income tax thresholds, the Resolution Foundation has calculated.
The stealth tax will raise more than twice as much as originally thought because of high inflation, the think tank estimates.
The findings will intensify calls from Tory MPs for tax cuts, after more than 30 of them signed a pledge this week not to vote for any more tax rises.
As chancellor in 2021, Sunak announced a four-year freeze on the thresholds at which people start paying income tax and the point at which the 40p rate kicks in, both of which normally rise with inflation. In the aftermath of Liz Truss’s disastrous mini-budget, Sunak and Hunt extended the policy to 2027-28 and also froze the threshold for employer National Insurance.
At the time this was projected to raise about £14 billion. This was later revised to £26 billion by the Office for Budget Responsibility, which estimated that the freeze would drag 2.1 million people into the higher rate (1).
However, inflation has remained far higher than previously thought and, using the latest Bank of England estimates, Resolution now calculates that the threshold freeze will raise £40 billion a year by 2027-28.
If thresholds had risen with inflation, people would not start to pay income tax until they earned £16,200, instead of £12,570, meaning they will pay an extra £720 in tax.
The 40p rate threshold, currently £50,270, would have risen to £65,000 with inflation, the foundation says. This means higher rate tax payers in 2027-28 will be paying an extra £3,700 as a result of the freeze.
Sounds like robbing Peter to pay Paul … 
(1) Both the the lower paid group and the higher-rate new entrants are unlikely to be tax-dodgers, unlike well-known businesses and Tory cronies … 