PERSONAL ACCOUNT

Hammond takes his cue from Osborne: higher earners are to pay yet more

Those on the Left may be reluctant to admit it but it is a fact that tax changes introduced by the former chancellor George Osborne – and now extended by his successor, Philip Hammond – mean the wealthy are bearing an increasingly large share of Britain’s total income tax burden.

This shift has not been undertaken in an upfront way. It has been brought about with more subtlety, some would say deviousness.

There’s the raising of taxes, and then there’s the cutting of tax allowances. They sound like two different things: in effect, though, they are the same, resulting in more tax paid.

This week’s Autumn Statement, modest as it was in relation to personal finances, did nothing to change the overall direction of tax policy: those with high incomes pay more, and they tend to do so as a result of the successive withdrawal of allowances and perks.

Under Mr Hammond, it seems, we can expect to see more of that in the future.

Tax allowances for lower earners have risen fastest and, in future, will be pegged to inflation. As Mr Hammond says, increases to the personal allowance since 2010 have taken four million people out of the income tax net altogether.

By contrast, tax allowances for middle-to-high earners have in many cases been dramatically cut.

And there are no promises to link allowances for the very highest earners to inflation, or indeed to anything else. On the contrary, reading between the lines of Mr Hammond’s cautious policies, there seems a clear commitment to Mr Osborne’s view that those at the top of the income scale remain ripe for further tapping.

The bigger picture is that the overall tax split in Britain – the mix of income tax, corporation tax, indirect taxes such as VAT, property taxes and so on – has remained largely constant. Income tax is the biggest contributor to the Exchequer.

What has changed over time, however, is the distribution of the income tax burden across those who pay.

The personal allowance – the amount of income you can receive before paying any tax whatsoever – has gone up fast.

In 2010 it was £6,475 for those of working age and £9,490 for those over 65, slightly higher for over-75s.

Today it’s £11,000 for everyone,