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Rachel Reeves looks to keep ‘stealth tax’ freeze on thresholds

25-10-2024

Rachel Reeves is expected to prolong the freeze on personal tax thresholds beyond 2028 in a move that could raise £7bn a year – equivalent to an increase in the basic rate of income tax by 1p. The Conservatives introduced the freeze in 2021 but it was due to expire in 2028. According to the Institute for Fiscal Studies, an extension until 2030 would drag an extra 400,000 people into the basic rate of tax and 600,000 into the higher and additional rates. People start paying income tax at 20% when their income reaches £12,570 and the higher 40% rate at £50,270. The Office for Budget Responsibility has said the basic rate threshold would have reached £16,310 by 2028/29 had it climbed in line with prices, with the higher rate only starting at £65,510. Labour has been of accused of hypocrisy over the move with the Chancellor last November saying that the Tories were “picking the pockets of working people” as the threshold freeze dragged more people into higher tax brackets while Sir Keir Starmer called the freeze a "stealth tax on working people".

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