London Daily

Focus on the big picture.
Saturday, Dec 06, 2025

Rishi Sunak accused of imposing £21bn ‘stealth tax’ on UK workers

Rishi Sunak accused of imposing £21bn ‘stealth tax’ on UK workers

Rising inflation means four-year freeze on income tax thresholds will raise more than budgeted for, says IFS

Rishi Sunak has been accused of using a “stealth tax” on incomes that will bring in more than double the amount he budgeted for, as the cost of living rises at the fastest rate for three decades.

Ahead of the chancellor’s spring statement to the House of Commons next week, the Institute for Fiscal Studies said rapidly rising inflation means the Treasury could raise £13bn more than anticipated by freezing the income tax personal allowance and higher rate threshold.

It said the four-year freeze, announced by Sunak at the spring budget last year, had been expected to bring in £8bn for the exchequer by dragging millions of workers into paying more tax.

However, the Treasury estimate was based on a far lower inflation rate than now forecast amid Britain’s unfolding cost-of-living emergency. With a dramatic rise in energy bills pencilled in for this April and Russia’s invasion of Ukraine driving up gas prices to record levels, the IFS said freezing the income tax thresholds would now bring in £21bn for the public purse.

Paul Johnson, the director of the IFS, said: “With much higher inflation forecasts, it looks like being a massive £21bn tax rise – two-and-a-half times bigger than intended.”


Under the plan announced last spring, the personal allowance – the level above which workers start paying income tax – will be frozen at £12,570 from the beginning of next month until 2026.

The threshold for higher-rate income tax – when workers start paying 40% instead of the standard 20% rate – will be frozen at £50,270 over the same period.

The plan was controversial with low-tax Conservatives uncomfortable with the chancellor lifting the tax burden to the highest sustained rate since the end of the second world war. However, Sunak has defended the measures as fair and responsible ways to deal with record levels of government debt incurred during the coronavirus pandemic.

At the time of the spring budget, the Office for Budget Responsibility – the Treasury tax and spending watchdog – estimated the plan would bring as many as 1.3 million more people into paying income tax and 1 million more into paying at the higher rate.

Although wages are rising – meaning more people will pay higher rates of tax – pay is failing to keep up with soaring inflation. Official figures show that inflation-adjusted pay, excluding bonuses, fell at the fastest rate in eight years in January.

Experts now say significantly more people will face heftier tax bills. Sam Robinson, a senior researcher at Bright Blue, an independent thinktank for liberal conservatism, said: “Freezing income tax thresholds is a poorly targeted measure, which would increasingly benefit more affluent individuals. After the events of the last few months, we need bold policies that deliver targeted support for those who need it most during this cost-of-living crisis.”

The chancellor is also under pressure to scrap his manifesto-busting rise in national insurance contributions announced last autumn, which is due to come into force next month and is expected to bring in about £12bn. Labour and several prominent Conservative backbenchers have urged Sunak to change course at the spring statement to help Britons with surging living costs.

Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, said: “We’re facing a horrible stealth tax on our incomes, which will cost us far more than we ever expected.

“Freezing income tax thresholds in a time of wage inflation is going to have a far bigger impact than anyone initially thought, and hit us just as hard as we initially thought the national insurance hike would.”

A Treasury spokesperson said: “Our approach ensures that higher earners contribute more – while the vast majority of taxpayers will still pay the basic rate of tax by 2026.

“We recognise the pressures people are facing with the cost of living and are providing support worth around £21bn this financial year and next to help.”

Newsletter

Related Articles

0:00
0:00
Close
Drugs and Assassinations: The Connection Between the Italian Mafia and Football Ultras
Hollywood megadeal: Netflix acquires Warner Bros. Discovery for 83 billion dollars
The Disregard for a Europe ‘in Danger of Erasure,’ the Shift Toward Russia: Trump’s Strategic Policy Document
Two and a Half Weeks After the Major Outage: A Cloudflare Malfunction Brings Down Multiple Sites
UK data-regulator demands urgent clarity on racial bias in police facial-recognition systems
Labour Uses Biscuits to Explain UK Debt — MPs Lean Into Social Media to Reach New Audiences
German President Lays Wreath at Coventry as UK-Germany Reaffirm Unity Against Russia’s Threat
UK Inquiry Finds Putin ‘Morally Responsible’ for 2018 Novichok Death — London Imposes Broad Sanctions on GRU
India backs down on plan to mandate government “Sanchar Saathi” app on all smartphones
King Charles Welcomes German President Steinmeier to UK in First State Visit by Berlin in 27 Years
UK Plans Major Cutback to Jury Trials as Crown Court Backlog Nears 80,000
UK Government to Significantly Limit Jury Trials in England and Wales
U.S. and U.K. Seal Drug-Pricing Deal: Britain Agrees to Pay More, U.S. Lifts Tariffs
UK Postpones Decision Yet Again on China’s Proposed Mega-Embassy in London
Head of UK Budget Watchdog Resigns After Premature Leak of Reeves’ Budget Report
Car-sharing giant Zipcar to exit UK market by end of 2025
Reports of Widespread Drone Deployment Raise Privacy and Security Questions in the UK
UK Signals Security Concerns Over China While Pursuing Stronger Trade Links
Google warns of AI “irrationality” just as Gemini 3 launch rattles markets
Top Consultancies Freeze Starting Salaries as AI Threatens ‘Pyramid’ Model
Macron Says Washington Pressuring EU to Delay Enforcement of Digital-Regulation Probes Against Meta, TikTok and X
UK’s DragonFire Laser Downs High-Speed Drones as £316m Deal Speeds Naval Deployment
UK Chancellor Rejects Claims She Misled Public on Fiscal Outlook Ahead of Budget
Starmer Defends Autumn Budget as Finance Chief Faces Accusations of Misleading Public Finances
EU Firms Struggle with 3,000-Hour Paperwork Load — While Automakers Fear De Facto 2030 Petrol Car Ban
White House launches ‘Hall of Shame’ site to publicly condemn media outlets for alleged bias
UK Budget’s New EV Mileage Tax Undercuts Case for Plug-In Hybrids
UK Government Launches National Inquiry into ‘Grooming Gangs’ After US Warning and Rising Public Outcry
Taylor Swift Extends U.K. Chart Reign as ‘The Fate of Ophelia’ Hits Six Weeks at No. 1
250 Still Missing in the Massive Fire, 94 Killed. One Day After the Disaster: Survivor Rescued on the 16th Floor
Trump: National Guard Soldier Who Was Shot in Washington Has Died; Second Soldier Fighting for His Life
UK Chancellor Reeves Defends Tax Rises as Essential to Reduce Child Poverty and Stabilise Public Finances
No Evidence Found for Claim That UK Schools Are Shifting to Teaching American English
European Powers Urge Israel to Halt West Bank Settler Violence Amid Surge in Attacks
"I Would Have Given Her a Kidney": She Lent Bezos’s Ex-Wife $1,000 — and Received Millions in Return
European States Approve First-ever Military-Grade Surveillance Network via ESA
UK to Slash Key Pension Tax Perk, Targeting High Earners Under New Budget
UK Government Announces £150 Annual Cut to Household Energy Bills Through Levy Reforms
UK Court Hears Challenge to Ban on Palestine Action as Critics Decry Heavy-Handed Measures
Investors Rush Into UK Gilts and Sterling After Budget Eases Fiscal Concerns
UK to Raise Online Betting Taxes by £1.1 Billion Under New Budget — Firms Warn of Fallout
Lamine Yamal? The ‘Heir to Messi’ Lost to Barcelona — and the Kingdom Is in a Frenzy
Warner Music Group Drops Suit Against Suno, Launches Licensed AI-Music Deal
HP to Cut up to 6,000 Jobs Globally as It Ramps Up AI Integration
MediaWorld Sold iPad Air for €15 — Then Asked Customers to Return Them or Pay More
UK Prime Minister Sir Keir Starmer Promises ‘Full-Time’ Education for All Children as School Attendance Slips
UK Extends Sugar Tax to Sweetened Milkshakes and Lattes in 2028 Health Push
UK Government Backs £49 Billion Plan for Heathrow Third Runway and Expansion
UK Gambling Firms Report £1bn Surge in Annual Profits as Pressure Mounts for Higher Betting Taxes
UK Shares Advance Ahead of Budget as Financials and Consumer Staples Lead Gains
×