London Daily

Focus on the big picture.
Tuesday, Oct 27, 2026

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
Education or Indoctrination? The Growing Debate Over Religious Participation in British Schools
Germany's Vanishing Shopfronts: The Silent Collapse of the Businesses That Built Its Cities
Transport for London Unveils Expanded Zero-Emission Bus Fleet to Meet Capital Air Quality Targets
Higher Education Institutions Face Deepening Financial Strain Amid Declining International Student Enrolment
Automotive Industry Leaders Criticize Government Tax Policies and Urge Action on Retail Consumer Confidence
Environment Agency Issues Flood Alerts Across Scottish and English Waterways Following Heavy Rainfall
Independent Audit Highlights Persistent Security Vulnerabilities Across Legacy Government Digital Portals
Northern Ireland Political Leaders Clash Over Westminster Funding Allocations Ahead of Autumn Budget
Ethnic Minorities in England Face Significant Disparities in Routine Breast Cancer Diagnosis Rates
National Police Chiefs Report Alarming Surge in Domestic Abuse Cases Fuelled by Expanding Illegal Cocaine Market
Government Announces Two Hundred and Twenty Million Pound Pothole Funding Boost for Local Highway Authorities
China Issues Formal Warning Over Potential United Kingdom Restrictions on Chinese Electric Vehicles
British Defence Ministers Sign E5 Pact to Enhance European Military Capabilities and Industrial Cooperation Within NATO
United Kingdom Business Activity Expands at Fastest Pace in Eight Months According to S&P Global Flash Survey
Chancellor John Healey Prepares Major Devolution Package and Bank Profit Surcharge Ahead of Upcoming Autumn Budget
National Health Service Consultants in England Announce Two-Day Strike Action Scheduled for November
Major Clean-Up Under Way Across Britain Following Destruction Caused by Consecutive Storms Austen and Boelo
KEY TRENDS TO WATCH
Declassified Intelligence Files Reveal British Security Services Monitored National Health Service Founder
British Government Launches Sweeping Regulatory Crackdown on High-Risk Cosmetic Procedures
Scottish National Party Demands Ban on Using Scottish Revenues to Fund English Nuclear Energy Projects
Mayor of London Initiates Landmark Pedestrianisation of Oxford Street to Revitalise Global Retail Hub
British Judges Granted Expanded Legal Powers to Punish Convicted Killers Who Refuse to Attend Sentencing
United Kingdom Poised to Miss Reduced International Aid Spending Targets Ahead of Fiscal Review
Surging Cocaine Consumption Drives Record Drug Fatalities and Rising Crime Rates Across Britain
Department of Health and Social Care Announces One Hundred and Forty Million Pound Boost for Urgent Care
British Services Sector Records Strongest Growth in Eight Months Despite Broader Economic Uncertainty
United Kingdom Retail Sales Suffer Unexpected Decline as Consumer Confidence Plummets
Greater Manchester Mayor Andy Burnham Urges National Debate on Restoring European Union Free Movement
Deep Cabinet Divisions Emerge Over Controversial Approval of North Sea Fossil Fuel Projects
United Kingdom Government Urges Citizens to Stockpile Essential Supplies in National Resilience Pivot
Storm Boelo Kills Two People and Cuts Power to Tens of Thousands Across Great Britain
Critical Software Flaw Forces Dozens of United Kingdom Government Services Offline Amid Mass Security Warnings
UK Consumer Confidence Tumbles Amid Rising Energy Costs and Global Commodity Price Pressures
North Sea Transition Authority Approves Production from Jackdaw Gas Field to Bolster Domestic Energy Security
Storm Boelo Leaves Tens of Thousands of Households Without Power Across Scotland and Northern Ireland
UK Government Launches National Be Ready Campaign Urging Households to Prepare Three Days of Emergency Supplies
Department for Environment Food and Rural Affairs Implements Stricter Water Quality Regulations for British Rivers
Welsh Government Launches Major Renewable Energy Initiative to Expand Offshore Wind Capacity Along the Coast
Northern Ireland Executive Reaches Final Agreement on Comprehensive Regional Infrastructure Modernization Plan
Office for National Statistics Reports Moderate Increase in British Retail Sales Driven by Autumn Discounts
Scottish First Minister Announces Emergency Housing Strategy to Tackle Severe Homelessness Across Urban Centers
Automotive Industry Leaders in the United Kingdom Urge Government Support for Electric Vehicle Manufacturing Transition
United Kingdom and European Union Initiate High-Level Negotiations on Post-Brexit Defense and Security Pact
National Health Service England Introduces Sweeping Digital Reforms to Reduce Hospital Waiting Lists Nationwide
Chancellor of the Exchequer Outlines Emergency Fiscal Measures to Address Local Government Funding Crises Across England
Bank of England Governor Warns of Persistent Inflation Pressures Impacting Interest Rate Decisions in the United Kingdom
UK Conservative Party Suspends Former Electoral Candidate Following Undercover Investigation
Actors and Writers Condemn British Anti Terror Legislation Targeting Activist Groups and Free Speech
Central Bank and Treasury Monitor Inflation Risks as International Monetary Fund Upgrades United Kingdom Growth Forecast
×