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Rishi Sunak ‘stealth tax’ to cost workers more than £20bn amid soaring cost of living

Income tax thresholds have previously increased with inflation, a measure of the cost of living, but last year Prime Minister Rishi Sunak announced a four-year freeze, affecting millions of workers.

The new hourly rate will be £9.90 UK-wide
The Treasury will receive £12.5 billion more in revenue from the income tax threshold freeze than originally thought, analysis revealed on Wednesday, prompting Tory calls for tax cuts

The tax impact of freezing income tax thresholds would be much larger than previously thought amid rising costs of living, according to a research team.

The tax threshold usually increases with inflationarybut last year prime minister Rishi Sunak announced the freezing of income tax thresholds for 4 years.

The Institute for Fiscal Studies (IFS) said that, based on inflation forecasts at the time, this was expected to represent a £8 billion tax increase.
Since then, inflation has increased sharply.

Taking this into account, new analysis by researchers at IFS suggests that the policy is now expected to mean a £20.5 billion tax increase.

This is the top of An increase of 1.25 percentage points for national insurance slated to start April, to help pay for NHShealth and social care in the UK.

“Typically tax thresholds go up with inflation,” said Tom Waters, a senior research economist at IFS.

“Last March, when the Prime Minister announced a four-year income tax freeze, inflation was quite low and so he expected it to rise by around £8 billion a year.

“Since then inflation has risen rapidly and is expected to climb even higher, peaking at more than 8%.

“That means the tax threshold freeze is now on track for a £20.5 billion tax increase – two and a half times more than originally planned.

“And this is behind the £13 billion increase in national insurance contributions projected for next month.

“This episode highlights the danger with setting nominal tax thresholds over the long term – unexpected changes in inflation can make the size of the projected tax increase larger or smaller. more than expected.”

The freeze adds to the growing cost of living crisis due to Energy prices soar.

The government is warning the number of poor people next month will increase by 3 million next month as living standards fall the most in 50 years.

About 12 million people could face poverty by October without government help next week Spring declaration, research to export that. It comes between a Warm Homes Sale Launch there will be 200,000 people removed from support this winter.

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The Mayor of Labor Underground, the First Minister of Wales, former prime minister Gordon Brown and more than 60 Labor Council leaders from across the UK have called on the Prime Minister to offer to help families.

Research by the Alliance for Full Employment (AFFE) suggests that without urgent Government measures, fuel poverty in the UK would increase by 150% before the onset of winter.

Labor leaders, most of whom are co-founders of AFFE, signed an open letter to Prime Minister Rishi Sunak expressing concern about the difficulties families are facing.

They called for a halt to the planned increase in national employee insurance rates in April and said more help with energy costs was needed for the poorest households.

The letter read: “Six million low-income families have lost £20 a week because of cuts General Credit in October.
“Further cuts to the value of their income, as heating and food bills soar, will add to the cost-of-living crisis they and many others face.

“These cuts are unfair and for many people will be unbearable – pushing them to the brink of extreme poverty, and leaving them unable to adequately heat their homes or even provide the nutrition their children need.

“We had to find a way, because intimidation is unacceptable and avoidable suffering for millions of our fellow citizens, especially children, across our communities.” .”

Mr Brown said the study suggested an additional 3 million people would become hungry in the next few weeks and 12 million could face fuel poverty by October.

A Government spokesman said: “The early years of a child’s life are the most important, which is why we have invested more than £3.5 billion a year over the past three years to provide free childcare, including 30 hours per week for working parents.

“We are also investing millions of dollars in Family Hub, where families can access important support services.

“To further support working families, we also recently announced the largest-ever national living wage increase since it was introduced April 2022, and Thanks to the action we’ve taken, unemployment continues to fall with more employees on the payroll than ever before.”

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https://www.mirror.co.uk/money/rishi-sunaks-stealth-tax-leave-26488466 Rishi Sunak 'stealth tax' to cost workers more than £20bn amid soaring cost of living

Fry Electronics Team

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