Stealth Tax Raid On Your Money Goes On and On Until 2028

4th May 2024

National Insurance reductions in your pay packet are one thing but the stealth taxes wipe it out up until 2028 and who knows what will happen then. And National Insurance reductions do not help pensioners and anyone who does not have a job. In fact thee is an ongoing pull into tax from pensioners offsetting the so called triple lock increases.

Stealth tax refers to government policies that increase tax revenue without directly or explicitly labelling them as tax hikes. These taxes often take the form of adjustments to existing taxes and allowances, fees, or other government charges, rather than the introduction of new higher taxes.

The term stealth taxes implies that these changes are designed to be less noticeable to the general public. Bluntly, the Government may look to introduce these less obvious changes, or indeed make no changes at all, so as to avoid criticism, potentially relying on blind siding taxpayers.

However, some would argue that such measures can be necessary for funding government programs and services or indeed paying back the mountain of debt the UK is now faced with, while avoiding public backlash. One thing is certain however, there are currently many different types of stealth taxes, which means few people are immune from paying much more tax now and potentially in the coming years. Even those not normally concerned are starting to sit up and notice; with the impact of fiscal drag on their finances, it's hard not to feel the pinch.

Latest figures from HM Revenue and Customs (HMRC) show that total tax receipts for April 2023 to November 2023 are £515.9 billion, which is £24.0 billion higher than the same period last year.

In ‘normal' times the Government has typically pursued a policy to increase tax allowances with the rate of inflation. However back in in 2021 the Government announced plans to freeze allowances and thresholds until 2026. This was later extended to 2028. A clever and rewarding move by the Government. The impact of this is staggering and continues to grow, for example, according to the BBC, simply freezing Income Tax bands until 2028 will create an additional 3.2 million new taxpayers and mean 2.6 million more people will pay higher rate tax. In fact, the Institute for Fiscal studies has stated that by 2027/28 one in eight nurses and one in four teachers will pay higher rate tax.

Even pensioners aren't immune. According to HMRC an additional 800,000 pensioners will be paying income tax this year due to higher inflation pushing up state pension, which will take many of them over the frozen personal allowance.

Added to this, in the spring Budget early in 2023, the Chancellor announced a reduction in the amount you could earn before paying additional rate tax at 45%. Previously you would have breached the additional rate tax band once your earnings exceeded £150,000 per year, however, from April 2023 it was cut to £125,000, dragging many more people into the additional rate tax net.

For more on this topic go to The Private Office