Rachel Reeves’ stealth tax raid is set to hit workers earning £48,000 a year harder than those on £150,000. According to a new analysis of the tax threshold freeze, confirmed by the Chancellor in her Budget, workers on middle incomes, including police officers, teachers and nurses, will be affected the most.
Ms Reeves confirmed plans to extend the freeze on personal income tax thresholds until 2031, dragging millions of Brits into higher brackets. Research from the Institute for Fiscal Studies shows that those earning £48,000 a year will pay an extra £603.50, while those earning £46,000 will pay an additional £410.46 a year by 2031. However, someone earning £150,000 a year will pay just £393.59.
As reported by the Daily Mail, the Chancellor has defended the move and insisted those with the « broadest shoulders » should pay their « fair share » of tax. She previously added that the freeze « is not a breach of the manifesto, but it is asking everybody to contribute more ».
Shadow Chancellor Sir Mel Stride said: « Rachel Reeves is trying to pull the wool over Britain’s eyes. She said the wealthiest would contribute the most, but the biggest tax rise in her Budget was a stealth tax which hits middle earners the hardest.
« This isn’t economic necessity, it’s a choice, with working people’s pay packets being raided to fund Labour’s decision to increase the benefits bill. Rachel Reeves wants to pretend she is protecting working people, but in reality, she is punishing them. »
After then-Prime Minister Rishi Sunak imposed a freeze on tax thresholds in 2022, Ms Reeves, in Opposition, likened the move to « picking the pockets » of working people. The Chancellor then ruled out extending the freeze any further in her first budget in 2024.
However, she confirmed the decision was taken alongside Sir Keir Starmer in her November Budget. After being questioned over breaking manifesto promises, Ms Reeves said: « Our manifesto was clear; it referred to the rates of income tax, national insurance and VAT. But I have been very clear… that everyone makes a contribution through freezing those thresholds. »
Experts predict that an extra 5.2 million low-earning Brits will be dragged into the income tax system by the end of the freeze. Meanwhile, 4.8 million middle earners will pay the 40p tax rate which was designed for the rich.
