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Stealth taxes ‘to cost families £10.9bn by 2026’

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Written by: Emma Lunn
07/01/2022
The Conservative government’s stealth tax raid will cost the average family in England and Wales £430 a year by 2026, or a total of £10.9bn.

The predictions are based on calculations and research commissioned by the Liberal Democrats.

The party said the figures reveal the scale of the cost to families of the government’s decision to freeze the personal tax allowance and higher rate tax threshold until 2025/26, compounding the growing cost of living crisis.

The analysis by the House of Commons Library has found the freeze will mean an additional 1.5 million people on low pay will be dragged into paying income tax by 2026, while a further 1.25 million people will fall into the higher rate tax bracket. 

The research is based on modelling using the latest inflation forecasts from the Office of Budgetary Responsibility.

The Liberal Democrats are demanding that the government drops its planned stealth tax raid that will “clobber families who are already feeling the pinch,” amid soaring energy bills and the rising cost of living.

Regional figures show that London and the South East are set to be hardest hit by the stealth tax, with an average hit to incomes of £500 per household. 

An estimated 230,000 more people in the South East will be paying the higher income tax bracket and an extra 210,000 will be paying income tax, leading to a total hit of £1.9 billion to taxpayers in the region in 2026. 

In London, there will be 210,000 additional higher rate taxpayers and 155,000 more people paying income tax.

Across all regions, household disposable incomes are estimated to be 1% lower in 2025/26 than they would be if there was no freeze to income tax thresholds, or £430 lower per household.

Christine Jardine MP, Liberal Democrat Treasury spokesperson, said: “Boris Johnson must drop this unfair stealth tax that will clobber families who are already feeling the pinch. 

“People are worried about the rising cost of living and paying their bills this winter. Now they face years of tax rises under a Conservative government that is taking them for granted.”

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