Latest news with #fiscaldrag
The Sun
2 days ago
- Business
- The Sun
Kemi Badenoch throws down gauntlet to Keir Starmer and demands no stealth taxes on Brits
KEMI Badenoch has thrown down the gauntlet to Keir Starmer on the economy demanding no stealth taxes on Brits. The Tory leader has written to the Prime Minister saying 'tax rises are a choice'. She has challenged him to repeat Chancellor Rachel Reeves' promise at the Budget last year not to extend the freeze on income tax and National Insurance thresholds. Failing to end the freeze as planned in 2028 would mean millions more Brits are forced into paying a higher rate of tax under fiscal drag. This is when people are pulled into higher income tax brackets as inflation pushes their wages up. It comes after a bombshell report said the Chancellor must find £50billion in her autumn Budget to keep the country's finances in check. She will have to raise taxes or cut spending to maintain her stated financial cushion of £9.9billion by the end of the decade, according to the National Institute of Economic and Social Research. At the Budget, Ms Reeves said: 'Extending the threshold freeze would hurt working people. "It would take more money out of their payslips. 'I am keeping every single promise on tax that I made in our manifesto, so there will be no extension of the freeze in income tax and national insurance thresholds.' Ms Badenoch asked the PM: 'I am writing to you to ask: does this remain government policy?' Kemi Badenoch pleads for Tories to give her more time just like Margaret Thatcher was given A Labour spokesperson said: 'We'll take no lectures from this failed Tory Party. "They crashed the economy which sent bills and mortgages rocketing, and left a £22 billion blackhole. 'Kemi Badenoch's next letter should be an apology to hard-pressed households for the Conservatives' role in hammering their family finances. 'Labour is the only party focused on creating a fairer Britain.' 1
The Sun
4 days ago
- Business
- The Sun
Workers could see wages shrink by £320 due to Labour's stealth tax rises – check how your pay could be affected
EMPLOYEES could see their wages shrink by £320 due to Labour's stealth tax rises. The government recently said it will not commit to lifting the freeze on income tax thresholds or national insurance (NI) in the next Budget - a move that would force millions of Brits into paying a higher rate of tax. 1 Workers would be pushed into higher tax brackets as their wages rise with inflation - a concept known as fiscal drag. The tax thresholds were frozen under the Tories, and are set to be lifted in April 2028. It has now emerged that people could see their wages fall by £320 under if the freeze is extended by Labour. According to wealth manager Quilter, if the freeze is extended by two years, a worker earning £30,000 could end up paying an extra £106 in income tax and national insurance in 2028-29 and an extra £214 in 2029-30. Someone earning £60,000 would pay an extra £317 in 2028-29 and an extra £643 the following tax year. Meanwhile, someone on £150,000 would pay an extra £354 in 2028-29 and an extra £718 the following tax year. The freeze to income tax brackets means almost 2.9 million more people will pay the basic rate of income tax - which is 20% on earnings between £12,571 to £50,270 - in 2025-26 compared to 2021-22. Over 2.6 million more will pay the higher rate - which is 40% on income from £50,271 to £125,140. If Rachel Reeves does decide to extend the freeze on income tax brackets in her autumn Budget, it will mark yet another Labour U-turn. The Chancellor previously ruled this out in last year's Budget, saying extending the policy would "hurt working people". Millions of workers to get pay rise as Rachel Reeves reveals income tax changes But economists believe Ms Reeves will be forced to renege on her promise, as she struggles to fill a £5billion black hole in the public finances. The Chancellor also needs to find an extra £1.5billion to pay for winter fuel following another U-turn by her party. TaxPayers' Alliance head John O'Connell told the Telegraph: 'This is the sad but inevitable result of successive governments' assortment of anti-affluence tax policies, which penalise aspiration and success. 'The UK is now trapped in a doom loop with the Chancellor desperately scrabbling around for more cash to fill the fiscal black hole and increasingly finding her only option is to come after the middle classes. 'Rachel Reeves needs to now show some humility and reverse the policies that have done so much to drive away high earners.' The prime minister last month refused to commit to lifting the income tax freeze in 2028. He only pledged not to increase National Insurance, income tax, or VAT. Tory leader Kemi Badenoch criticised the stealth tax, saying it would hit "struggling pensioners" who would be dragged into paying income tax for the first time ever. A Tory Party spokesman said at the time: 'The PM wouldn't repeat the promise his Chancellor made in the autumn to lift the freeze on income tax thresholds. "He also refused to rule out a retirement tax and wealth taxes. "The only reasonable conclusion is that a toxic cocktail of Labour tax rises are coming in the autumn budget.'
Telegraph
5 days ago
- Business
- Telegraph
Middle-income workers shoulder biggest tax burden increase
Middle-class workers are shouldering the biggest increase in the tax burden thanks to a stealth raid on thresholds, analysis suggests. The share of income tax paid by those who earn between £43,000 and £61,900 rose from 15.1pc to 17pc between 2021-22 and 2025-26, according to the TaxPayers' Alliance. During the same five-year period, the share of income tax paid by the top 1pc, those earning more than £201,000 a year, fell from 30.7pc to 26.6pc, the pressure group found. It comes as Chancellor Rachel Reeves faces a £50bn black hole in the public finances and declining tax revenue as high-net-worth individuals look to move abroad. Analysis by the Financial Times this month revealed there had been a 40pc rise in directors moving abroad since Labour's autumn Budget. The Taxpayers' Alliance report found the proportion of total income tax receipts increased for every group except for the top 1pc of earners, thanks to a series of stealth taxes first introduced by the Conservatives. Income tax thresholds, including the £12,570 tax-free 'personal allowance', were frozen at the 2021 budget by then chancellor Rishi Sunak until 2025-26. A year later, his successor, Jeremy Hunt, extended the freeze until 2027-28. Despite promising not to raise taxes on working people, Sir Keir Starmer has not ruled out extending the freeze further to 2029-30. Keeping thresholds frozen means earners lose a larger share of their incomes to tax, as inflation pushes up wages in a process known as fiscal drag. The stealth raid means almost 2.9 million more people will pay the basic rate of income tax in 2025-26 than in 2021-22, while over 2.6 million more will pay the higher rate. Including other rates, almost 6 million more people are forecast to be paying income tax than in 2021-22. John O'Connell, chief executive of the TaxPayers' Alliance, said: 'This is the sad but inevitable result of successive governments' assortment of anti-affluence tax policies, which penalise aspiration and success. 'The UK is now trapped in a doom loop with the Chancellor desperately scrabbling around for more cash to fill the fiscal black hole and increasingly finding her only option is to come after the middle classes. 'Rachel Reeves needs to now show some humility and reverse the policies that have done so much to drive away high earners.' The respected National Institute of Economic and Social Research on Tuesday warned slowing economic growth, a weak jobs market and Labour's failure to commit to welfare reform meant Ms Reeves was on course to miss her borrowing targets by £41.2bn. When combined with the £9.9bn of headroom the Chancellor has committed to keeping, it means she is facing a £51.1bn deficit in the autumn that will either have to be solved by raising taxes or cutting spending. The study also underlined the importance for the Treasury's balance sheet to keep the highest earners in Britain. Despite the proportion of tax paid by the top 1pc of earners falling, the group still accounts for more than a quarter of all income tax receipts. Analysis of Companies House by the Financial Times found that 3,790 company directors had left Britain between October and July compared with 2,712 in the same period a year earlier. Significant names have included Richard Gnodde, Goldman Sachs ' most senior banker outside the US, Nassef Sawiris, the Aston Villa co-owner, and British property tycoon brothers Ian and Richard Livingstone. It comes after Labour launched a wide-ranging tax raid after coming to power last year. This included abolishing the non-dom status and tightening inheritance tax rules. Laura Suter, of AJ Bell, said: 'Government tax policy in the past few years has had the dual outcome of pushing some of the wealthiest to leave the UK and also landing more taxpayers with higher tax bills at the same time. 'Together, this means that an increasing proportion of the total tax bill of the country is paid by middle earners, rather than the super-rich. 'Looking ahead, any potential tax-raising measures that Rachel Reeves makes in her next Budget could exacerbate this dynamic further.' Trevor Williams, a former chief economist at Lloyds Bank, previously warned Britain was facing a millionaires' exodus. Mr Williams said: 'Since 2014, the number of resident millionaires in the UK dropped by 9pc compared with the world's 10 wealthiest countries' global average growth of more than 40pc. 'Over the same period, the US saw a 78pc increase in millionaires – the fastest wealth growth [among these countries].' The Treasury insisted that under its Plan for Change it would keep more money in people's pockets. A spokesman said: 'This government inherited the previous government's policy of frozen tax thresholds. At the Budget and the Spring Statement, the Chancellor announced that we would not extend that freeze. 'We are also protecting payslips for working people by keeping our promise to not raise the basic, higher or additional rates of income tax, employee National Insurance or VAT. That's the Plan for Change – protecting people's incomes and putting money into people's pockets.'
Yahoo
14-07-2025
- Business
- Yahoo
UK highest income tax rate payers surpass one million
The number of UK taxpayers paying the highest income tax rate has reached 1.14 million in the 2024-25 tax year, according to UHY Hacker Young. It marks a 24% increase from the 923,000 recorded in the 2023-24 tax year. The number of 'additional rate' taxpayers, paying 45% tax, is expected to rise to 1.23 million this year. During the past five years, the number of taxpayers paying the 45% rate has surged by 163%, rising from 433,000 in the 2020-21 tax year. Neela Chauhan, partner at UHY Hacker Young, attributes this increase to 'fiscal drag,' where inflation gradually moves more taxpayers into higher tax brackets, often referred to as a stealth tax. People with earnings of more than £125,140 ($170,416) are required to pay the income tax at the additional rate of 45%. Chauhan said: 'The sharp jump in the number of people having to pay the highest rate of tax is worrying as its not caused by people who are becoming genuinely wealthier. Rather it is due to the Chancellor deciding to freeze thresholds. Though it might seem equitable for higher earners to be paying more tax, there are real concerns over the impacts of placing an ever higher tax burden on high earners. 'Increasing the tax burden too high could push these individuals to leave the country or deter talented individuals from moving to this country. There are concerns that there is a 'brain drain' already taking place due to the Government's non-doms policies.' Recently, Donald Parbrook, a senior tax partner at Azets, called on Chancellor Rachel Reeves to reconsider proposals from the Office of Tax Simplification to address the UK's complex tax system. The aim is to enhance revenue without harming business confidence or deterring investment, with the Autumn 2025 Budget as a potential platform. In response to economic changes, including trade uncertainties and fiscal tightening, the Chancellor is expected to propose significant tax reforms. These may involve revisiting earlier adjustments to inheritance tax, pension rules, and National Insurance, as public finances remain under pressure and new revenue sources are sought. "UK highest income tax rate payers surpass one million " was originally created and published by The Accountant, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
The Sun
28-06-2025
- Business
- The Sun
How to legally pay less tax on your income as millions hit with stealth taxes
MILLIONS of workers will be hit with higher tax bills in the coming years as frozen thresholds will force them to hand over more of their earnings to the taxman. Around 4.1million extra workers will be dragged into higher tax bands by 2027-28, according to the most recent figures from the Office for Budget Responsibility. 1 Income tax thresholds are frozen until April 2028, which means that more people could find themselves pushed into higher tax bands through a concept called fiscal drag. The higher rate tax band is frozen at £50,270, which means any earnings over this amount are taxed at 40%. Meanwhile, the additional tax band is currently fixed at £125,140, beyond which any earnings are taxed at 45%. But there are things you can do to prevent a surprise tax bill from landing on your doorstep. Here we explain how you can reduce your tax bill and avoid the tax trap. Apply for tax relief One way to reduce your tax bill is to claim tax relief. You can claim the relief on your job expenses, which means you will take home more of your income and pay less tax. To be eligible you must use your own money for things that you need to buy for your job and you only use for work. You can claim for items including working from home, uniforms, work clothes, tools, vehicles you use for work, travel and overnight costs. You cannot claim tax relief if your employer gives you all the money back or alternative equipment. You will get the relief based on what you have spent and the rate at which you pay tax. For example, if you claim £60 of tax relief and usually pay tax at 20% then you will get £12 back. The exact amount you could get depends on what you are claiming for. For more information and to make a claim visit How do I check my tax code? YOU can check your tax code on your personal tax account online, on any payslips or on the HMRC app. To log in, visit If you have one, you can also check it on a "Tax Code Notice" letter from HMRC. Bear in mind that you might need your Government Gateway ID and password to hand to log in. But if you don't have this you can use your National Insurance number or postcode and two of the following: A valid UK passport A UK photocard driving licence issued by the DVLA (or DVA in Northern Ireland) A payslip from the last three months or a P60 from your employer for the last tax year Details of a tax credit claim if you have made one Details from a self assessment tax return (in the last two years) if you made one Information held on your credit record if you have one (such as loans, credit cards or mortgages) Claim marriage allowance If you are married or in a civil partnership then you may also be able to reduce your tax bill by claiming Marriage Allowance. Every worker has something called a Personal Allowance. This is the amount of money you can earn every financial year before you start to pay Income Tax. For the current tax year the Personal Allowance is £12,570. If you earn less than this then you usually do not have to pay Income Tax. Marriage Allowance is a special tax rule that lets you transfer £1,260 of your Personal Allowance to your husband, wife or civil partner. It is free to apply for and can reduce your tax bill by up to £252 every tax year. To be eligible you need to be married or in a civil partnership. Your income must be below £12,570 and your partner must pay Income Tax at the basic rate, which usually means their income must be between £12,571 and £50,270. Ian Futcher, financial planner at Quilter, said: 'Many eligible couples haven't claimed this, often because they simply don't realise it exists. 'It can be backdated for up to four years if you're eligible.' The fastest way to apply for the allowance is online and you should get an email confirming your application within 24 hours. You can also claim Marriage Allowance by post using the MATCF form. For more information visit Make use of salary sacrifice Salary sacrifice is a great way to top up your income without paying any tax. It lets you exchange some of your wages for a different benefit from your employer, such as a company car, childcare vouchers or pension contributions. Your salary is then reduced by the cost of any benefits you choose. As your salary is lower, you will pay less tax and National Insurance. For example, someone who earns the UK average salary of £37,430 could decide to sacrifice £200 a month into their pension. Over the course of a year they would pay £2,400 into their pension. By using salary sacrifice their wage would fall to £35,030 a year, which would save them around £480 a year in Income Tax. They would also save nearly £200 in National Insurance, which means their total saving would be £672. Salary sacrifice also saves your employer money on National Insurance. Many employers will pass this saving on to you by paying more money into your pension. As a result, your total pension contribution could be more than £2,700. Sarah Coles, head of personal finance at Hargreaves Lansdown, said it is worth checking if your employer offers salary sacrifice. She said: 'It will not boost your take-home pay, but it will cut your tax bill and make your money go further.' Pay into pension If you are lucky enough to earn more than £60,000 a year then you may be able to get more Child Benefit with an under-used trick. Child Benefit is paid by the government to parents or other people who are responsible for bringing up a child. It is currently worth £26.05 for the eldest or only child and £17.25 for every additional child you have. You get this full payment if you earn less than £60,000 a year. But beyond this point you need to start paying the benefit back at a rate of 1% for every extra £200 you earn. The payment disappears entirely once you earn more than £80,000 a year. But you may be able to hang on to more of your Child Benefit with a simple trick, Ian Futcher explains. He said: 'If your earnings are close to the threshold, using pension contributions or salary sacrifice to reduce your taxable income could allow you to keep more of your Child Benefit.' For example, if you earned £61,000 a year then paying £1,000 into your pension would allow you to keep all of your Child Benefit. .
