By 2025/26, one in six taxpayers could be paying above basic rate.
Cast your mind back to 2019 and the start of the Conservative Party’s contest to find a new leader. The headline of that first day was a proposal from one of the then many candidates to raise the higher rate threshold to £80,000. The candidate who put that idea forward went on to win the contest: Boris Johnson.
Last week’s Budget makes that £80,000 threshold appear even more distant than it did two years ago. Rishi Sunak, Mr Johnson’s second Chancellor (but the first to deliver a Budget) has parked the higher rate threshold at £50,270 from 2021/22 through to 2025/26. The freezing of the personal allowance and higher rate threshold will add nearly £8.2bn to the Treasury’s coffers by 2025/26.
NB No reliable numbers yet for 2020/21 and 2021/22 because of the pandemic.
Working through the numbers, Treasury papers and external research, some other facts emerge:
At the lower end of the income scale, freezing the personal allowance will drag 1.3m more people into tax by 2025/26 – a far cry from the last decade when Chancellors focussed on the numbers removed from tax.
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