London (Parliament News) – A leading think tank warns of looming tax increases in the UK, projecting an average burden of £800 per household annually by 2028-29, irrespective of the election outcome. Both major parties remain silent on reversing these measures.
What Warning Did the Resolution Foundation Issue About Taxes?
Tax increases “hiding in plain sight” that will command UK households an average of £800 a year are already on the course for whoever wins the general election, a leading thinktank has cautioned. While the Conservatives and Labour dispute about what levies the other would introduce in power, the Resolution Foundation has cautioned that already announced measures will raise the total tax taken by about £23bn a year by 2028-29.
Neither party has dedicated to axing the moves from recent budgets and autumn views, which include the continuance of the six-year freeze to income tax and individual national insurance thresholds and next spring’s lapse of temporary cuts to business rates, fuel duty and stamp duty land tax.
What Are the Implications of Freezing Tax Rates?
Freezing existing tax rates raises revenue for the Treasury since inflation and resulting pay upgrades mean more people are pulled into the higher-rate tax round, a process known as fiscal drag. Income tax points have been frozen since 2022 and are predicted to remain so until April 2028.
Why Is the Treasury Projecting Historic Tax Revenues?
The sum the Treasury is extending from taxes is at a historic high, the Resolution Foundation found, because of gains in corporate tax revenue and taxes on higher earners. The share of taxpayers spending a higher marginal rate of 40% or more has increased from one in 10 of the population in 2010 to one in six in 2023, equal to 3 million more people. However, some middle-income earners are better off because of this year’s cuts in national insurance assistance.
How Accurate Are Claims About Tax Increases?
The commentary comes days after Rishi Sunak declared in the first televised debate that Keir Starmer would increase taxes by £2,000 “for everyone”. The assertion was ignored by the Labour leader as “absolute garbage” and refuted by the Treasury permanent secretary, James Bowler, who said ministers had been told not to offer civil servants had produced the figure.
The Conservatives were also charged by the UK statistics watchdog on Thursday over the claim. The Office for Statistics Regulation stated it was concerned that those listening would have no way of understanding the £2,000 was not an annual tax rise but was a sum total over four years.
How Have Tax Policies Changed Over Recent Elections?
The study discovered that after the past eight elections, the first two fiscal circumstances have introduced new tax policies that increased taxes by an average of £21bn a year.
It came as a separate piece from the Institute for Fiscal Studies (IFS) think tank, which calculated that the earnings of families with children have fallen by an average of £2,200 a year since 2010 after modifications to taxes and benefits. The IFS uncovered parents who were out of work have had the most significant fall in their incomes, failing £5,500 a year, but in-work families had their entitlements cut back.
Among the changes impacting families with children are reductions in the level of child tax credits and the “two-child limit”, which prohibits child tax credit and universal credit to the first two children in most households. The IFS stated the overall benefit cap also primarily impacted families with children.