A silent financial assault is underway on British pay packets, as a devastating 'stealth tax' threatens to siphon over £1,200 from millions of workers across the nation. The mechanism? A prolonged freeze on income tax thresholds that's pushing earners into higher tax brackets without a single penny extra in real terms pay.
The Frozen Trap: How Your Tax Bill is Secretly Rising
Chancellor Jeremy Hunt has extended the freeze on income tax personal allowance and higher-rate threshold until April 2028. This seemingly technical move creates a fiscal drag phenomenon where inflation and wage growth – not actual wealth increases – push more earnings into tax territory previously reserved for higher incomes.
Analysis reveals the shocking reality: a typical higher-rate taxpayer could be £1,200 worse off by 2027-28. Basic-rate taxpayers face a £500 blow, while an additional 3.2 million workers will be dragged into the higher 40% tax bracket. This includes one million who will breach the £50,270 threshold for the first time.
The Numbers Behind the Squeeze
The figures paint a stark picture of the Treasury's windfall at the expense of households:
- Personal allowance frozen at £12,570 until 2028
- Higher-rate threshold locked at £50,270 for same period
- 2.1 million more paying higher-rate tax since thresholds began freezing
- 400,000 pushed into additional 45% tax rate
- Fiscal drag expected to raise £44.6 billion for Treasury
Expert Warnings: 'Biggest Tax Burden in 70 Years'
Sarah Coles, head of personal finance at Hargreaves Lansdown, doesn't mince words: "The freeze has been an absolute nightmare for taxpayers... dragging millions into higher tax brackets and increasing the bill for millions more."
The Resolution Foundation think tank confirms the severity, noting this parliament will oversee the biggest tax increase since World War II. The tax burden is hurtling toward a 70-year high of 37.7% of GDP by 2028-29.
Who Bears the Brunt of This Stealth Attack?
Middle-income professionals face the sharpest end of this fiscal squeeze. Teachers, nurses, police officers and middle managers seeing modest pay rises are discovering those increases come with a hidden penalty – a larger percentage snatched by the taxman.
The freeze represents a fundamental breach of the progressive tax system's principles, effectively creating inflation-driven tax increases without parliamentary approval or public debate.
The Political Storm Brewing
This stealth tax strategy, initiated under Rishi Sunak's chancellorship and extended by Hunt, has created cross-party controversy. Critics argue it undermines tax transparency and places an unfair burden on workers already struggling with cost-of-living pressures.
With the next general election looming, the frozen thresholds have become a political battleground, positioning fiscal drag as one of the most significant – yet least understood – financial issues facing British households today.
