£1,000 stealth tax burden will punish the middle classes, says expert, as households will feel pain'
Middle-class earners will be hit with a £1,000 stealth tax raid next year, experts have warned in a bleak assessment of the Budget.
All households face ‘continuing pain’ amid a ‘lost decade for living standards’ as they are hammered by high prices and low wage growth, the Institute for Fiscal Studies (IFS) said.
Public spending plans are set to be tighter than previously thought with more money going on defence and childcare and Jeremy Hunt expected to find more money for public sector pay.
Paul Johnson, director of the research institute, said yesterday: ‘What households are going to feel over the next year will be continuing pain. Inflation may be coming down, but prices remain much higher than two years ago. Earnings haven’t caught up.’
The stealth tax raid will raise £120billion for the Treasury over the next five years by taking up to six million more people into higher brackets, in a process known as fiscal drag.
The IFS calculated that if the salary threshold at which workers start paying the 40p rate of income tax – currently £50,270 – had risen in line with inflation since 2010, it would now be £56,680 and next month would go to £62,410.
Mr Johnson warned: ‘The freezing of income tax and national insurance contributions, allowances and thresholds will cost most basic-rate taxpayers £500 next year and most higher-rate payers £1,000.’
He also pointed to figures from the Office for Budget Responsibility (OBR) predicting a huge fall in people’s spending power.
Source of data and images: dailymail
