UK households in line for extra £800 annual bill due to planned tax rises
Households are in line to pay an extra £800 in tax over the next five years, according to new research from a leading think tank.
Although Labour and the Conservatives have promised not to raise income tax, National Insurance or VAT, the Resolution Foundation pointed out that both parties are going ahead with major pre-announced tax hikes.
The biggest single revenue raiser is the continuation of the frozen thresholds on income tax and National Insurance.
These thresholds were frozen in 2021 by then-Chancellor Rishi Sunak. Both Jeremy Hunt and Rachel Reeves have confirmed they will remain frozen until 2028.
Frozen thresholds force more and more people to pay higher rates as wages climb to match inflation, a phenomenon known as fiscal drag. The Resolution Foundation estimates these will raise £11bn a year by 2029.
On top of this, spring 2025 will also bring the scheduled end of temporary major cuts to business rates, fuel duty and stamp duty land tax.
Altogether, these measures are worth £23bn annually by 2028-29, equal to £800 a year per household.
“Secret tax bombshells are the bread and butter of any UK election campaign, and the current one is no different,” Adam Corlett, principal economist at the Resolution Foundation, said.
“What’s unusual is that £23bn of post-election tax rises – amounting to £800 a year per household, on average – have already been announced. No major party has committed to reversing them, apart from a small income tax pledge for pensioners,” he added.
The think tank noted that tax as a share of GDP grew considerably over the last parliament, having been stable for most of the 2010s. Taxes rose 3.3 per cent as a share of GDP over the last parliament, or £3,000 a year per household, the biggest increase in the tax take of any post-war parliament.
Increases have been concentrated among corporations, particularly those which have seen high profits, and higher earners. The share of taxpayers paying the higher rate has increased by 3m people over the last parliament.