UK stealth taxes snatch £241billion from workers

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UK stealth taxes snatch £241billion from workers

UK stealth taxes rip £241billion out of workers as 6.5million pay higher income tax rates

  • Number of people paying higher tax rates, up from 5 million two years ago

By John-Paul Ford Rojas, Associate City Editor

Published: 5:16 p.m. EDT, June 29, 2023 | Update: 9:14 p.m. EDT, June 29, 2023

Britain’s stealth taxes are snatching £241billion from workers, including £6.5million who now find themselves in the highest tax brackets.

The number of people paying at the top rate of 40% and the “additional” rate of 45% is up from 5million two years ago, when the thresholds were frozen.

New figures reveal the extent of the drain on the Treasury as a further 2.5 million people are dragged into paying income tax. The total tax levy is nearly £40 billion higher than two years ago.

Those paying the higher 40% rate and additional 45% rates of income tax will contribute an extra £31bn more in 2023/24 than in 2021/22, according to figures from HM Revenue and Customs .

Millions of middle-income workers are being pressured into paying rates originally intended for the rich or super-rich.

Those paying the top 40% rate and additional 45% income tax rates will contribute an extra £31billion in 2023/24 compared to 2021/22, according to figures from HM Revenue and Customs.

Former Tory leader Iain Duncan Smith said he was not surprised by the numbers, saying: ‘They are now punishing people who are not wealthy – senior teachers, nurses, ordinary people trying to earn their living. life “. We needlessly collect too much tax. With prices rising, it’s a double whammy’ (File photo)

Lenders raise mortgage costs

Many of the big lenders, including Nationwide and Halifax, have stepped up the pressure on mortgage holders with further rate hikes.

TSB, HSBC, Barclays, Natwest and Virgin Money have also increased or are about to increase borrowing costs.

This adds to the pain for first-time buyers and movers, who have already seen average rates for two-year fixed-term contracts top 6% – with five-year contracts now looking likely to hit that level soon.

Adding to evidence of the wider cost of living squeeze, data from the Bank of England released yesterday showed households withdrew £3.8billion from their savings in May, the most since the start recordings 25 years ago. Mortgage rates rose sharply on the expectation that the Bank will continue raising interest rates to combat stubbornly high inflation.

Figures from financial website Moneyfacts yesterday showed that the two-year fixed-rate transaction average reached 6.37%, while the five-year transaction average reached 5.94%.

The chaos prompted predictions of a collapse in house prices. Economists at Oxford Economics expect prices to fall steadily by 13% over two years.

With the number of taxpayers paying the higher 45p 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 45p rate. highest tax next year. It’s quite a seismic shift in the tax system.

By failing to increase tax brackets in line with inflation, workers are simply being punished for receiving annual pay rises, 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 numbers, saying: ‘They are now punishing people who are not wealthy – senior teachers, nurses, ordinary people trying to earn their living. life “. We needlessly collect too much tax. With rising prices, it’s a double whammy.

The figures starkly illustrate the growing weight of British fiscal pressure, which is heading towards its highest level as a proportion of GDP since the Second World War.

Freezing the threshold means that from April 2021 workers must start paying a basic tax of 20% on earnings over £12,570 and a higher rate of 40% on earnings over £50,270. An additional rate of 45% applies to salaries over £125,140.

The number of people paying income tax is expected to reach 35.3 million in the current financial year 2023/24. This represents an increase from 34 million the previous year. Total income tax will climb to £241bn, from £224bn a year earlier. Gareth Davies, Exchequer Secretary to the Treasury, said: ‘We want taxes to come down but we are in a very difficult position.

“We have provided unprecedented levels of support to businesses and consumers, whether through Covid or the energy crisis, and so it is obvious that this must be paid for. »

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Keith Ramirez

tech enthusiast and lifelong gamer. With a B.Tech in CSE, he combines his technical knowledge with his passion for gaming to create a unique perspective. Keith's love for gaming dates back to a time before games consoles even existed, making him a true veteran in the gaming world. From the 80s to present day, he has immersed himself in countless virtual adventures. As an Xbox Live Beta tester, Keith has had the opportunity to shape the future of gaming. Additionally, he has also served as a former gaming forum admin, fostering communities and sharing his gaming expertise with fellow enthusiasts.