Tax threshold freeze has almost tripled in size since its initial costings with next year’s freeze set to net £12 billion
- On April 5, 2023
- By GrowthInvest Marketing
The size of the UK’s ‘stealth tax’ threshold freeze over six years has almost trebled to £25 billion, compared to the £9 billion forecast when it was originally announced in the 2021 Budget, and later extended, according to new Resolution Foundation analysis published today (Saturday).
Happy new tax year, 2023! examines the personal tax and benefit changes that will take effect in April 2023 at the start of the new fiscal year and analyses what they mean for households.
The biggest personal tax change actually involves no change at all: the Chancellor is freezing the income tax personal allowance at £12,570 and the threshold for the higher rate of income tax at £50,270 – instead of uprating them in line with last September’s inflation figure of 10.1 per cent. Next year’s freeze alone is set to raise £12 billion a year by the time of the final freeze in 2027-28. These thresholds have now been frozen since 2021-22, and are set to remain frozen until April 2028. That six-year freeze is set to raise £25 billion by 2027-28 – almost triple the £9 billion forecast when it was announced in March 2021 and extended by a further two years in the 2022 Autumn Statement.
Most benefits and the state pension, on the other hand, are rising by 10.1 per cent. The state pension will rise by £750, while a single person receiving Universal Credit will get £400 more in 2023-24 than 2022-23. Despite these cash increases, basic benefit levels have still not kept pace with the rise in the cost of living since the start of 2021, and aren’t set to catch up until April 2024, when benefits are expected to be uprated by around a further 5 per cent.
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