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Threshold freeze equivalent to 3.5% tax hike

29 Nov 2022

The government's freeze on income tax thresholds will see some workers' tax bills rise by the equivalent of a 3.5% hike in the headline rate of tax, according to analysis by investment platform AJ Bell.

Someone on a salary of £50,000 will pay just under £59,000 in income tax over the six years of the threshold freeze, the research found. The total tax bill will be more than £9,000 higher than it would have been if tax thresholds had been uprated with inflation during that time, illustrating the damaging effect of fiscal drag on earnings.

The freeze does not only hit higher earners, as the average £33,000 earner will also see an equivalent 2% increase to a base rate of 22%.

Laura Suter, Head of Personal Finance at AJ Bell, said: 'These figures lay bare just how much the decision to freeze tax allowances will cost taxpayers over the six years of the freeze.

'They also highlight the sneaky tactics employed by the government to nab more money from our pay packets without many taxpayers realising.

'Imagine the uproar and headlines if the government had increased the basic rate of tax from 20% up to 23.5%. Not least because it would break a manifesto commitment. But, more importantly for voters, it would be much easier for them to understand the scale of the huge hike in their tax bill in the next few years.'

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Registered in England, Company Registration number – 7906656. Registered Office – 58b High Street, Stony Stratford, Milton Keynes, MK11 1AQ. Registered with the Chartered Institute of Taxation as a firm of Chartered Tax Advisers. Registered to carry out audit work and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales.