Average UK earners could end up paying £2,000 more Income Tax by 2028 if Chancellor of the Exchequer Jeremy Hunt keeps the threshold frozen.
A tax expert told British media that keeping the Personal Allowance frozen at the £12,570 level — set by Prime Minister Rishi Sunak in his last budget as chancellor this spring — was a "stealth tax" set to rise faster if wages follow inflation.
The chancellor reportedly plans to extend the threshold lock in his looming autumn financial statement — after rolling back tax cuts introduced by his predecessor Kwasi Kwarteng in his September mini-budget under short-lived PM Liz Truss.
Hunt reportedly told an exclusive event at swanky London hotel Claridge's that there was "no way of sugar-coating" the need for higher personal and business taxes, adding: "It's going to be a difficult pill for everyone to swallow."
Figures from wealth management giant Quilter showed that could add up to thousands extra in income tax payments over the next five years.
"These calculations illustrate the power of fiscal drag and how freezing income tax thresholds is a form of stealth tax," said the firm's tax and financial expert Shaun Moore.
If the threshold stays fixed for years, "you will end up paying considerably more tax," Moore warned. While Sunak froze the income tax floor until 2026, "with the cost-of-living crisis weighing heavy on government spending this could be extended."
Quilter's calculations showed that if salaries increase by three per cent per year, someone earning between £25,000 and £35,000 annually — less than the median income of £38,552 — would owe HM Revenue and Customs £400 more per year by 2028.
But if the average wage rise is five per cent, way below the current inflation rate of 10 per cent, income tax dues would be £695 higher every year five years from now.
Hunt, the leader of the pro-European Union faction in the ruling Conservative Party, has also signalled a return to the austerity policies following the 2008 'Credit Crunch' banking crisis.
He announced that the government's Energy Price Guarantee scheme, to subsidise household bills during the inflationary crisis caused by sanctions on Russia, would be "reviewed" after just six months — when Truss pledged it would run for two years, funded by government borrowing.