Prime Minister Liz Truss and Chancellor of the Exchequer Kwasi Kwarteng (left) during a visit to a construction site for a medical innovation campus in Birmingham, on day three of the Conservative Party annual conference at the International Convention Centre in Birmingham
HOUSEHOLDS will lose more from “opaque and stealthy” tax allowance freezes over the next three years than they will gain from headline tax cuts on average, according to a new study.
The Institute for Fiscal Studies (IFS) found that by 2025–26, the freezes will take away £2 for every £1 given to households through the headline cuts in personal taxation.
It also said that the four-year freeze of the personal allowance means that, by 2025–26, the number of people paying income tax will rise to 35.4 million, an increase of about 1.4 million.
The four-year freeze of the higher-rate threshold means that, by 2025–26, 7.7 million people will be paying higher-rate tax, the IFS added.
The institute said that because the £150,000 threshold on the 45p rate of income tax for high earners has been frozen since 2010, by 2025-26 there are projected to be about three times as many people paying additional-rate income tax as there were when the top rate was first introduced.
IFS research economist Tom Wernham, who helped write the report, said: “Freezes far more than outweigh headline policies such as the 1p cut to the basic rate of income tax or the reversal of the health and social care levy and they are set to drag millions more into the tax system and into higher rates of tax.
“Giving with one hand and taking with the other in this way is opaque and stealthy.”
Nuffield Foundation welfare programme head Alex Beer said: “Parents currently subject to the cap struggle to meet their children’s basic needs and that increases maternal mental ill health and risks affecting children’s emotional and physical development.”
Publication of the study came as Shell chief executive Ben van Beurden called on the government to tax oil and gas companies in order to cushion the impact of soaring energy costs on society’s worst-off people.
Mr van Beurden said: “One way or another, there needs to be government intervention that somehow results in protecting the poorest.”
Labour shadow chancellor Rachel Reeves said: “I don’t want to hear any more pitiful Tory excuses for shielding energy giants and putting all the costs onto public borrowing.
“We need a proper windfall tax on energy giants’ extraordinary profits and we need it now.”
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