Boris Johnson’s stealth tax to cost families £10.9 billion by 2026

The Conservative government’s stealth tax raid will cost the average family in England and Wales £430 a year by 2026, or a total of £10.9 billion, research commissioned by the Liberal Democrats has revealed.

The figures reveal the scale of the cost to families of the government’s decision to freeze the personal tax allowance and higher rate tax threshold until 2025/26, compounding the growing cost of living crisis.

The new analysis by the House of Commons Library has found the freeze will mean an additional 1.5 million people on low pay will be dragged into paying income tax by 2026, while a further 1.25 million people will fall into the higher rate tax bracket. The research is based on modelling using the latest inflation forecasts from the Office of Budgetary Responsibility.

The Liberal Democrats are demanding that the government drops their planned stealth tax raid that will “clobber families who are already feeling the pinch,” amid soaring energy bills and the rising cost of living.

Regional figures show that London and the South East are set to be hardest hit by the stealth tax, with an average hit to incomes of £500 per household. An estimated 230,000 more people in the South East will be paying the higher income tax bracket and an extra 210,000 will be paying income tax, leading to a total hit of £1.9 billion to taxpayers in the region in 2026. In London, there will be 210,000 additional higher rate taxpayers and 155,000 more people paying income tax, with a total tax bombshell of £1.8 billion. Across all regions, household disposable incomes are estimated to be 1% lower in 2025/26 than they would be if there was no freeze to income tax thresholds, or £430 lower per household.

Liberal Democrat Treasury Spokesperson Christine Jardine MP said:

Boris Johnson must drop this unfair stealth tax that will clobber families who are already feeling the pinch.

People are worried about the rising cost of living and paying their bills this winter. Now they face years of tax rises under a Conservative government that is taking them for granted.

Many lifelong Conservative voters in Blue Wall areas feel this government no longer represents them. It’s little wonder that so many are now turning to the Liberal Democrats instead.

Quoted in the Telegraph, Paul Johnson of the Institute for Fiscal Studies said people faced a squeeze this year that “could well be worse than the financial crisis”. Torsten Bell, the chief executive of the Resolution Foundation said: “April in particular is going to be a cost of living catastrophe, and the year as a whole will be defined by the squeeze.”

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10 Comments

  • It is only a true cost to families if the money raised is spent wastefully. It is easy to knock the government for raising taxes – but much harder to identify areas of government expenditure which should be cut. It is cheap politics to constantly say public services eg the ambulance service in Shropshire are under funded but then knock the govt for raising more money. If I had the good fortune to live in Edinburgh West I would probably vote for Christine Jardin but she should do better than this.

  • John Marriott 7th Jan '22 - 1:25pm

    There has GOT to be a payback time sometime in the future for all the borrowing that has been necessary over the past few years as well as finding the money that is needed to pay for improved services. So, where is the money going to come from? More borrowing, yes; but, if we expect Scandinavian levels of public services, we aren’t going to get them on North American levels of taxation. Yes, i’ve written this several times on LDV.

    By all means tax the rich more; but don’t expect those of us on moderate incomes to be exempt. My ‘go to’ tax is one on income. What’s yours?

  • Steve Trevethan 7th Jan '22 - 5:43pm

    Might our Party publicise, and educate ourselves and the great British public on, the essential need for taxation and taxation clarity?
    https://www.taxresearch.org.uk/Blog/2018/01/03/the-reasons-to-tax/

  • Brad Barrows 7th Jan '22 - 5:59pm

    Easy to criticise a tax increase – the challenge is to identify an alternative. So is the Party in favour of some other tax being increased instead of this method? Or has the Party identified spending cuts that would negate the reason for the tax increase? Or maybe the Party is in favour of Public Sector borrowing to be higher as the alternative? Future press releases need to give more details if the Party wishes to be taken seriously.

  • Incomplete analysis.
    Given the higher wages etc. in London and Southeast, any tax increase targeted at the “better off” will naturally hit the London and southeast hardest. This is obvious from the charts where the percentage impact on a household’s disposable income is consistent across the country.

  • Huge amounts have been spent over the last few years. The country is continuing to spend huge amounts. We are asked to use the test kits if we are meeting people we do not know. The ones I have were made in China.
    The world financial system will have to collapse at some time. Money is simply being created out of nothing.
    We need to face the reality. We need real things like food clothes and other goods. We should realise that we cannot eat money. We need to be concentrating on making real things which real people need.
    And for those keen on “invisible” earnings, they are likely to be ever more invisible!

  • We need to raise money that is clearly true. What happens is that all party policies that say how that will be done are highlighted by the opposition and consequently the public do not vote for that party. Should the Lib Dems be the party of political suicide/honesty in politics? Hard choices with no easy answers.
    You get what you pay for has neve been more true!

  • Adrian Sanders 8th Jan '22 - 10:54am

    No one likes paying tax, but £430 by 2026 for people earning over £50k today seems a fair price to pay towards the debt Johnson and his Government have accrued in office. Compare it to the £25 Universal Credit cut and you will see who is really paying while facing the full force of inflation rises in energy, food and housing costs. Where is our strategy to win back the voters who support the idea that none shall be enslaved by poverty?

  • Malcolm Todd 8th Jan '22 - 1:39pm

    In what world is this a “stealth tax”? There’s no tax more upfront and obvious than income tax. You could call it a “stealth increase” because it doesn’t involve putting rates up or cutting thresholds, just freezing them; but even that is pushing it, since it’s been announced quite openly. I don’t recall Lib Dems calling the increase in the threshold between 2010 and 2015 as a “stealth tax cut”!

  • Jenny Barnes 8th Jan '22 - 3:50pm

    Capital gains tax on all future increases in house value; capital gains treated as income for tax purposes; inheritances taxed as income over say 10 years, increase tax on incomes over 10*median. Carbon tax used to fund a UBI, including taxing aviation fuel.

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