UK Budget: How Much Money the New Tax Will Take from Workers.

Costs Due to Raab's Tax Policy

According to The Sun: It has been revealed how much citizens will lose due to the tax initiated by Rachel Reeves, according to the new autumn budget. The Chancellor is likely to continue freezing tax thresholds, which, according to forecasts, will lead to lower wages for workers by hundreds of pounds.

This follows Reeves not ruling out the possibility of continuing the freeze at the Labour Party conference this week.

“I cannot guarantee this,” she told the BBC, commenting on the possibility of extending the freeze.

Tax thresholds are income levels at which people start paying National Insurance or income tax or move into higher rates. Usually, these thresholds are raised annually in line with inflation, but for the last four years, they have been frozen by the Conservative government, with new increases expected only in April 2028.

This means that workers risk falling into a higher tax bracket or starting to pay taxes on their income for the first time if their salary increases.

Continuing the freeze until 2029/30 could bring in around £7 billion a year.

Experts' Warnings

However, such a move would represent a turnaround for the Chancellor, who previously dismissed this measure in last year's budget as “harmful to working people.”

Karen Barrett, founder of Unbiased, noted that “many people” may be concerned about the issue of increased tax burden following Reeves' comments.

“If personal tax thresholds had risen with inflation since the freeze, they would be over £16,000 instead of £12,570, which would be beneficial as living costs have risen over the last few years,” she added.

Among the advice for those at risk of moving into a higher tax bracket, experts recommend making additional contributions to their pension.

“It is always worth considering consulting a qualified financial advisor if you need help managing your finances and tax obligations,” she advised.

How Much Could You Lose?

Data analyzed by Quilter showed how the continuation of the freeze would impact workers with different salaries across the UK.

For example, if the freeze continues for two years, a worker earning between £20,000 and £40,000 will pay an extra £106 in income tax. By 2029/30, this amount will rise to £214.

For those earning £45,000, a rise in salary could lead to moving into the 40% tax bracket, resulting in even greater tax increases. In this case, the worker would pay an additional £317 in 2028/29 and £643 in 2029/30.

These rates will remain unchanged until the worker starts earning over £100,000 a year.

For instance, a person with an annual income of £125,000 will pay £354 in income tax in 2028/29 and £718 in 2029/30.

“Stealth taxes are quietly eating into people's salaries through obscure ways,” said Sean Moore, a tax and financial planning expert at Quilter.

“However, fiscal pressure will remain an important tool for increasing treasury revenues, so it shouldn't be dismissed as an option in the next budget.”

Martin Lewis, founder of Money Saving Expert, also emphasized that the public is paying more taxes “through stealth.”

“[Stealth tax] is a deliberate move to extract additional taxes from the public in secret. It would be good to get rid of [it],” he said.

Sharlene Young, a pensions and savings expert at AJ Bell, added: “We have become so accustomed to frozen tax brackets that the public may have completely forgotten what it is like when they are raised in line with inflation.”

As of now, tax thresholds are frozen until 2028, but the Chancellor may overturn last year's budget promise to end the freeze to revise his financial forecasts.

The Treasury has been invited to comment on the situation.

Thus, the current tax policy and the potential continuation of freezing tax thresholds raise concerns among experts and the public. Amid rising living costs and economic resilience, such a strategy may have serious consequences for most citizens, as indicated by numerous analysts. Whether changes will occur in the next budget remains to be seen, but until then, it is important to pay attention to the financial aspects that may impact people's everyday lives.