The Chancellor could increase taxes for millions of Brits in her Spring Statement this month.
Rachel Reeves could extend the income tax band freeze in her Spring Statement (Image: Getty)
An extra £4,100 per year could be added to the tax bill for millions of Brits following Rachel Reeve’s Spring Statement. The Conservative freeze on income tax bands could be extended after the Chancellor told the Financial Times that “nothing [is] off the table”.
The freeze extension would see £4,100 added to a taxpayer earning £75,000, raising a staggering £15bn, Telegraph analysis shows. Since the measure was first introduced in 2021, workers on this salary have paid nearly £15,000 more in tax. If the band freeze was extended by a single year, an extra £810 would be added to the bill of a taxpayer earning £39,000.
The Chancellor has taken ‘nothing off the table’ ahead of economic announcement (Image: Getty)
On Wednesday, the Office for Budget Responsibility (OBR) warned the Treasury that the £9.9bn fiscal headroom had been depleted. This means the Chancellor will look to raise finances elsewhere.
However, due to Labour’s commitment to just one fiscal event a year, the Spring Statement on March 26 is not intended to include tax measures.
An extension on income tax and National Insurance band freezes for a further two years, in 2028-2029, would raise £5bn, according to an analysis by the Institute for Fiscal Studies (IFS) using current Bank of England inflation predictions.
The analysis also shows that a longer freeze from 2029 to 2030 would raise £10.1bn by current standards, and this would increase if inflation is higher than expected.
The current band freeze will see the number of higher-rate taxpayers, who pay 40% on earnings over £50,270, jump by 2.5 million this year, the OBR says.
Former Conservative Chancellor Jeremy Hunt first introduced the freeze in March 2021. (Image: Getty)
A forecasted 3.5 million workers will also start to pay income tax this year, according to the watchdog, which is tax on earnings over the personal allowance of £12,570.
Former Conservative Chancellor Jeremy Hunt first introduced the freeze in March 2021, taking effect from April 2022 until the next tax year. However, this has been extended multiple times.
A Treasury spokesman said: “We are committed to keeping taxes as low as possible for working people by protecting payslips from tax rises while ensuring fiscal responsibility, that’s why we chose not to extend the freeze on personal tax thresholds past 2027-28.”
