The vast majority of the 50 UK regions that will be hardest hit by Rishi Sunak’s plan to freeze income tax thresholds are in London and the South East, according to a new analysis.
With the Chancellor under pressure to do more to ease the cost of living crisis when he delivers his spring statement on Wednesday, research by the Liberal Democrats shows how the Treasury’s decision to freeze the higher rate of income tax will lead to a £2.5billion tax raid on middle-income families.
Although more attention has been given to Mr Sunak’s plans to increase National Insurance by 1.25 percentage points from next month, the Chancellor has also previously announced that the income tax rate higher was to be frozen at £50,270 until April 2026, instead of rising. in line with inflation.
Previous research commissioned by the Lib Dems of the Library of the House of Commons suggested that this would push around 1.25 million middle-income people into the top tax bracket by 2026, costing taxpayers to higher rates across the UK averaging £500 each by this year.
The latest Lib Dems analysis finds the country’s worst-hit parliamentary constituency is set to be the cities of London and Westminster, where around 6,500 basic-rate taxpayers are set to be sucked into paying the highest rate of tax in here 2026.
The party says families in the constituency face an “annual tax bomb of £16.7m” by 2026 due to the higher rate threshold being frozen.
Twenty-two of the 50 areas worst hit by Rishi Sunak’s stealth tax on middle-income families are in London. But the majority are in the southeast or in areas considered part of the capital’s wider suburban belt.
Esher and Walton, the Surrey constituency held by Deputy Prime Minister Dominic Raab, is expected to be the hardest hit outside the capital, with 5,790 higher rate taxpayers and a £12.7million tax cut pounds per year by 2026.
Lib Dem leader Ed Davey said: “Rishi Sunak is hammering the tight midfield with years of stealth taxes, on top of soaring energy bills and rising mortgage payments. It’s a slap in the face for middle-income families who have worked hard and paid their taxes all their lives.
“People are worried about how they’re going to cope with rising bills this year. The Chancellor could help them with the stroke of a pen, by removing these tax increases which are coming at the worst possible time.
Although Mr Sunak received a boon from the latest public finance figures on the eve of his spring statement on Tuesday, Mr Sunak appears set to resist calls for another major intervention to help families facing rising utility bills. energy, inflation and tax hikes.
It is reported that he could consider cutting fuel taxes by 5p a liter to ease the pressure on motorists who have seen petrol and diesel prices soar, while he is also considering d increase benefit payments. But after announcing a £9billion support package to help people with rising energy bills last month, the Chancellor is expected to wait until later in the year – when prices and bills are expected to climb further – before offering more grants and loans to help struggling households.
* The Lib Dems’ analysis was based on data provided by the Treasury in response to a parliamentary question posed by the party’s St Albans MP, Daisy Cooper. The Treasury provided information on the number of higher rate and additional rate taxpayers through 2018-19, the most recent data available on constituency taxpayers. The party then estimated the number of higher rate taxpayers in each area based on national figures provided by HMRC.