Sunak Stealth Raid Will Be Biggest UK Tax Rise Ever, Study Shows

Tom Rees
·2 min read
  • Oops!
    Something went wrong.
    Please try again later.

(Bloomberg) -- UK Prime Minister Rishi Sunak’s stealth tax raid on households is on course to be the biggest tax rise on record after being turbocharged by high inflation, new research showed.

Most Read from Bloomberg

The Resolution Foundation think tank said freezing the personal allowance for six years will raise £40 billion ($48.5 billion) a year by 2027-28 as soaring wages drag millions of people into paying basic or higher-rate income tax.

The findings will add to concerns in Sunak’s Conservative Party over a large increase in the tax burden under his watch, first as chancellor of the exchequer and now as prime minister. Some Tory MPs are urging him to slash taxes to help close the opinion-poll deficit with the opposition Labour Party ahead of an expected election next year.

Fiscal drag was designed to help repair the damage done to the public finances by the pandemic. Freezing thresholds means the government can raise more money as inflation and wage growth push taxpayers into higher tax brackets. However, revenues from will be much higher than initially expected as prices and pay have soared.

“The reality of the largest, and ongoing, tax rise in at least 50 years is why any talk of pre-election tax cuts will inevitably be seen in the wider context of some far bigger tax rises,” said Adam Corlett, principal economist at the Resolution Foundation.

Sunak announced a four-year freeze in personal tax thresholds in 2021 when he was chancellor. This was extended by a further two years as Sunak and his chancellor, Jeremy Hunt, tried to steady the public finances last year following the turmoil unleashed by his predecessor Liz Truss’s radical economic plan.

Most Read from Bloomberg Businessweek

©2023 Bloomberg L.P.