The Department for Work and Pensions has warned that state pensioners, minimum wage earners and full time workers will all feel the impact if income tax thresholds remain frozen beyond the current 2028 deadline. The government is considering an extension to twenty thirty, despite concerns that fiscal drag is already pushing more people into higher tax brackets.
New analysis from the Institute for Fiscal Studies suggests that around nine hundred and sixty thousand people would be drawn into paying higher rates of tax if the freeze is prolonged.
Conservative Shadow Chancellor Mel Stride said the findings reveal the scale of the burden facing households. He accused Labour of breaking its promise not to extend the freeze and warned that families would pay the price.
Stride said: “This move would drag hundreds of thousands more people into paying tax or into higher bands, taking money from the pockets of hardworking people to pay for more and more welfare spending. Enough is enough. Labour need to show some backbone and control spending, not keep raiding family pay packets to cover for their own economic failure.”
Matthew Oulton of the Institute for Fiscal Studies said the current freeze is already one of the largest stealth tax rises in decades. He noted that while extending the freeze would raise significant revenue, it would also bring more full time employees, part time workers, minimum wage earners and many low income pensioners into the tax system.
Oulton added that using thresholds to adjust how tax is collected is a reasonable tool for any Chancellor, but warned that long term freezes are risky. “How big the tax rise turns out to be depends upon the unknown and unpredictable path of inflation,” he said.
