How to beat Sunak’s £47 billion stealth tax raid

  • New figures buried in the Autumn Budget show the Chancellor now expects to make £47 billion from freezing income tax thresholds
  • This is a 73% increase on the revenue forecast from the March Budget
  • A £50k earner will pay an estimated £5,282 more tax in the next five years as a result of frozen thresholds
  • How to beat the stealth tax raid


Laith Khalaf, head of investment analysis at AJ Bell, comments:

“A growing economy and inflationary pressures have turbo charged the tax revenues the Chancellor is now expecting to harvest from freezing tax thresholds, which he announced in the March Budget. While this is good news for the Exchequer, it means income taxpayers are going to suffer the consequences of Sunak’s stealth tax raid, to the tune of £47 billion over the next five years, according to figures squirreled away in the small print of the Autumn Budget. This is a significant upgrade to the tax revenue forecast in the March Budget, and goes some way to explaining why the Chancellor has so much cash to splash, and why the OBR says the tax burden is going to be the highest since the 1950s.

“Up until 2025/26, the latest figures from the Autumn Budget show the Treasury now expects to receive around £33 billion from freezing income tax thresholds, up from a forecast of £19 billion in March. (The Autumn Budget also provides a forecast for 2026/27 of £13.9 billion, taking the total over the next five years to £47 billion). The big jump in expected tax receipts comes from improved forecasts for wages, and higher inflation expectations, which would have bumped up tax thresholds if the Chancellor hadn’t frozen them.

“Taxpayers can normally expect to lose some of their wage growth to fiscal drag, because earnings tend to rise faster than inflation, and tax thresholds are tethered to the latter. But the move to freeze tax thresholds means taxpayers face fiscal drag on steroids. Wage increases won’t be offset at all by rising tax thresholds, and taxpayers will pay significantly more as a result. It will be difficult to totally avoid the onslaught, but there are legitimate ways to offset extra taxes though tax planning and tax shelters. With dividend tax rates also creeping up next year, wrappers like ISAs and SIPPs can also help to ensure that income from savings and investments isn’t adding to the problem.”

Stealth tax raid examples

The examples below show estimates of what taxpayers might pay in extra taxes as a result of income thresholds being frozen, depending on their income. The figures are based on OBR expectations for inflation and average earnings increases. The figures show that those getting paid around the higher rate threshold (frozen at £50,270) get hit pretty hard, because inflationary increases in the threshold would ordinarily have offered some protection against paying higher rate tax.

Income tax payable 2022/23 to 2026/27
Current income Frozen thresholds Inflation-linked thresholds Additional tax
£25,000 £14,808 £13,707 £1,101
£50,000 £46,621 £41,339 £5,282
£80,000 £112,449 £106,945 £5,505


Sources: AJ Bell, OBR

Assumptions: Wage growth and inflation rise according to OBR forecasts, income tax rates remain the same, individuals receive no additional income or income tax reliefs

How to beat the stealth tax raid

In the March Budget the Chancellor froze a number of tax allowances until 2025/26, the main ones being the personal tax-free allowance and the higher tax threshold, but the CGT free allowance and IHT allowance were frozen too. Below are some ways consumers can offset some of the tax rises to come.

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