Jeremy Hunt forces 1.5 million people into a higher tax band with a stealth raid on middle-income earners

Jeremy Hunt is forcing 1.5 million people into a higher tax band with his stealth raids on middle-income earners, according to projections.

Government projections showed that approximately 1.5 million additional workers will be drawn into higher income tax bands over the next five years.

And an additional 1,130,000 people will have to pay a 40 per cent higher rate tax by 2027-28 as a result of Chancellor Jeremy Hunt’s hidden tax blitz on middle-income earners.

Meanwhile, an additional 301,000 Britons will be drawn into the additional 45 per cent rate tax band over the same period, according to a freedom of information request by wealth manager Quilter.

Workers will pay record amounts of income tax over the coming years because of the Treasury’s recent takeover — even though profits have been hit by inflation.

An additional 1,130,000 will have to pay a 40 per cent higher rate tax by 2027-28 as a result of Chancellor Jeremy Hunt’s hidden tax raid on middle-income earners

Hunt froze income tax limits until the 2027-28 tax year to help pay off government debt, extending the moratorium that Rishi Sunak started when he was a chancellor.

Any earnings over £50,140 are taxed at 40 per cent. The 45 per cent rate goes to those earning more than £150,000, but that bottom line will drop to £125,140 in April in one of Hunt’s other fundraising strategies.

Income tax limits usually increase with inflation each year, and would have seen an exponential rise in 2023.

Freezing tax bands raises money for the Treasury over time because inflation forces wages higher, pushing more workers into higher tax brackets.

Projections suggest that 1.5 million Britons will pay significantly more in tax over the next five years even though their earnings have barely kept up with inflation, figures obtained by Quilter have found.

The large number of people being pulled into the higher tax band is due to a phenomenon called “fiscal drawdown,” in which tax thresholds are not raised in line with inflation and profits.

More than 300,000 additional workers will be drawn into the 45 percent surcharge rate band over the same period, according to a freedom of information request by wealth manager Quilter (file photo)

More than 300,000 additional workers will be drawn into the 45 percent surcharge rate band over the same period, according to a freedom of information request by wealth manager Quilter (file photo)

Experts warn that this means workers may feel worse off as their purchasing power stays the same but more of their money goes toward taxes.

Robert Salter, a tax expert at Blick Rothenberg, said that the fiscal handicap punishes workers for increasing their paychecks at a time of high inflation, when their cost of living is also rising.

The impact of the financial hurdles will only get worse over the next few years as costs continue to rise, and this will particularly affect parents as they may be charged higher income benefit fees – as they have to pay their child benefit, he said.

Salter added: “Calling someone on £50,140 on high wages these days is frankly an abuse of the English language. Someone on that salary couldn’t afford to buy a house in the south of England without help.”

HMRC expects an additional 186,000 people to pay a higher rate tax in 2022-23, rising to 739,000 by 2025-26 and 1,130,000 by 2027-28.

Meanwhile, the tax officer said that from 2023 to 2024, an additional 232,000 people were expected to pay the rate surcharge who would not have done so if the floor was kept at £150,000. This rises to 301,000 by 2027-28.

The numbers suggest the chancellor was aware of the impact his decision to freeze income tax limits and lower the overtime rate limit would have on workers.

The Institute for Fiscal Studies had previously said the decision could raise 30 billion pounds a year for the Treasury by 2026 due to rising inflation.

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