Think tank warn of ‘acute’ impact of tax threshold freeze as cost of living pressures spiral

Progressive think tank the Resolution Foundation has warned that the freeze on income tax thresholds will Treasury’s income tax threshold “particularly acute” as other costs of livings pressures increase.

House of Commons Library analysis suggests that the Treasury’s plan to freeze income tax thresholds will push over 1.2 million workers’ earnings above the 40p threshold by 2026.

The Foundation’s chief executive Torsten Bell told BBC Radio 4’s Today programme this morning: “It already feels like people are being squeezed. I think it’s going to feel particularly acute because of the combination of tax rises and energy bills in April, and particularly with energy bills a combination of policy decisions and the way the global market has played out means a lot of people’s prices are going up at the same time.

Bell served as director of policy for the Labour Party under Ed Miliband’s leadership.

“We’re obviously used to spikes in global energy prices but we’re not used to everyone’s bills going up at the same time. The tax increases will be disproportionately paid by higher earners, higher income households, that’s particularly true of the National Insurance rise that’s coming through.”

He said the price uptick will hit “much harder” for families already in low incomes, and will also put stress on retired households.

He called for a “much larger” intervention than Labour’s current proposal to cut the 5 per cent VAT on energy bills.

Small business minister Paulk Scully also told the Radio 4 programme that the scheduled freeze did not constitute “stealth tax”, claiming that those with “broader shoulders” ought to contribute more.