'Stealth tax' on incomes to remain until 2028, Hunt says
A squeeze on people's incomes due to frozen tax thresholds will continue until 2028 under Tory plans, Jeremy Hunt has confirmed.
Rishi Sunak introduced a freeze on tax-free personal allowance thresholds (the amount you can earn before you start paying tax) when he was chancellor back in 2021. In his autumn 2022 budget, Mr Hunt extended the time it would need to be in place from 2026 to 2028.
The frozen rates mean many have failed to feel the benefit of a the national insurance cut which kicked in this year.
The Office for Budget Responsibility also estimates the static rates will drag an additional four million people into paying tax by 2028 and push three million into a higher tax bracket. This is because wages will go up alongside inflation but the threshold won't.
The policy is often referred to as a "stealth tax".
Mr Hunt told BBC Radio 4's Today programme today: "The tax rises that happened as a result of the pandemic and the energy shock, these two giant shocks, will stay for their allotted time period."
But he reiterated the Conservatives' pledge to end the freeze after 2028, saying: "I can absolutely undertake that the threshold freeze that we introduced until 2028 will not continue after that."
The Tories have said they will unfreeze the thresholds for pensioners if they win the election.
Labour has also refused to commit to unfreezing overall tax thresholds.
Sir Keir Starmer said earlier that he believed the tax burden on working people was "too high" but that his party was not going to "make commitments that we cannot afford".
"Therefore I'm very clear about the tax that will remain and will be locked and where we cannot make those commitments," he said.
What are the tax thresholds and what do they mean?
The personal tax allowance is frozen at £12,570. You don't pay income tax on anything you earn below that - anything above is taxed at the 20% base rate. At the same time, the higher rate has been frozen at £50,271 - anything above that is taxed at 40%.
Tom Selby, director of public policy at AJ Bell, said the personal allowance, if it had been inflation-linked since 2021-22, would be forecast to rise to £15,989 by 2028 - nearly £3,500 higher than the frozen threshold.