Among the widespread forecasts of tax increase in the fall budget, the job said he was still committed to his commitment not to increase tax on employees.
This does not mean raising the original value added tax rate, national insurance or income tax.
However, Rachel Reeves has warned of “harder” choices to come up with a financial crisis event at the Liverpool Labor Conference in Liverpool. This has led economists to guess that changes in property taxes, ISAs, or even pensions can be made.
Official statistics have been revealed that government loans were the highest in August in five years, and higher tax revenues were offset by higher costs and debt. Given this clear image, some economists have predicted that the Chancellor may need to find £ 40 billion in the budget.
But each of the financial leverage that the Chancellor has decided to pull, many experts have also noted that if he is not recognized by “secret tax”, income tax will increase.
Here’s what you need to know:
What is the “secret tax”?
Since 2021, personal income tax allowance has been frozen at £ 12,570. This is the amount that can be paid before the tax deduction starts. The move has been criticized as a way to raise income income without rising rates.
This allowance and all rates are frozen by at least 2028 rather than rising with inflation or average income as in previous years.
The initial rate is 20 % subsequently paid up to 37700 pounds, a higher rate of 40 % of revenues of up to 125140 pounds and an additional 45 % revenue of more than 125141 pounds.
The impact of this is what economists call “financial stretch”, where more people are drawn to higher tax brackets with the average increase in income, but the thresholds are the same.
The Honorable Institute for Financial Studies (IFS) says the freezing reduces household income by an average of £ 1,250 by 2025/26. Analysts also noted that these measures would be more than any of the recent declines in national insurance and income in recent years.
Can Reeves Finish?
While Freeze is a Tory period policy, so it gives the work room to argue that this is not a violation of his obligations, the Chancellor may decide to finish it to provide the most necessary costs to support life for the UK.
However, this is “doing little to help the poorest community who does not have enough income to pay for income tax.”
Ending freezing also puts more pressure on the government to find additional revenue from other tax increases and reduce costs. Given that this policy is not just as fraudulent as the benefits of two children, for example, the Chancellor is unlikely to decide to eliminate it sooner.
What if the work of frost expands?
Another possibility is that the economic struggle with which the labor force is facing may be so great that the Chancellor decides to expand the ice in the tax group instead.
Adding two years to ice increases £ 7.5 billion, which means £ 140 extra tax, which is paid by basic rate employees each year by April 2028.
However, it is important to remember that this tax increase has no effect on some high -income households. ” This is because one million plus income whose income is above 125140 pounds – and so currently pays the highest income tax rates – is not affected.
While the Chancellor has denied independent wealth tax in recent weeks, Treasury officials have said that working with his next financial policy is seeking progressive.
Tax changes then target people such as assets and high -value income, such as the “mansion tax”.
