...We’ll take ‘sensible and responsible’ approach to cutting taxes
As nearly 2million more workers became ‘higher earners’, PM says
BORIS Johnson has warned that his Government will have to maintain a “sensible and responsible” approach to cutting tax.
Official figures yesterday showed that nearly two million people have been dragged into the higher income tax rates since the last general election in 2019.
In response, the Prime Minister insisted he wanted to “reduce” the duty burden on households.
But he also sought to dampen expectations of a rush to slash levies in the immediate future.
His remarks follow reports that he has agreed with Chancellor Rishi Sunak that tax cuts cannot be delivered until the current inflation surge subsides.
Figures released by HM Revenue and Customs yesterday showed that the Chancellor’s 2021 Spring Budget decision to freeze income tax thresholds had led to a significant increase in the number of earners paying both the 40 per cent and new 45 per cent higher rates.
In 2019/20, the number of Higher Rate income tax payers was 4.2million, but by 2022/23 the number had risen to 6.1million, an increase of almost 1.9million.
These figures include those paying at the “higher” 40 per cent rate or the “additional” 45 per cent rate.
The Higher Rate applies to that income between £50,271 and £150,000. The Additional Rate (45 per cent) is on any income above £150,000. The number paying at the 45 per cent rate has risen in three years from 421,000 to 629,000.
Asked about the figures during a news conference at the Nato summit in Madrid, the PM pointed to the Chancellor’s hike in March in the National Insurance threshold, due to come into force this month.
He said: “We’ve got a tax cut worth £330 for all payers of National Insurance contributions coming in, a very substantial tax cut in addition to what we’ve done on fuel duty and council tax. Of course, we always want to try to reduce burdens – but we always have to do it in a sensible and a responsible way.”
The income threshold at which people have to start paying NI will be increased by £3,000 to £12,570, on July 6.
Steve Webb, a former Lib Dem pensions minister and now a partner at the financial consultancy firm LCP, yesterday forecast that numbers of Higher Rate income tax payers will continue to soar due to the Chancellor’s four-year threshold freeze.
Estimates from consultancy LCP suggest that the total number of Higher Rate taxpayers could
increase by more than three million over the whole of this Parliament.
LCP predicted the total could soar to over seven million in 2024/25, including one in five of all taxpayers and marking a 70 per
cent increase in the number of Higher Rate taxpayers over the parliamentary term.
In 2009/10 there were around 3.2 million Higher Rate taxpayers, compared with an estimated 6.1 million in 2022/23. Mr Webb said: “Paying Higher Rate tax used to be reserved for the very wealthiest, but this has changed dramatically in recent years.
“The starting point for Higher Rate tax has not kept pace with rising incomes, and the current five-year freeze on thresholds has turbo-charged this trend.
“People who would not think of themselves as being particularly rich can now easily face an income tax rate of 40 per cent and around one in five of all taxpayers will soon be in the higher-rate bracket.”
Shevaun Haviland, directorgeneral of the British Chambers of Commerce, yesterday urged the Government not to impose any more tax rises on businesses before the next election.
She told the organisation’s annual conference in London: “The role of government is to set the conditions that allows the UK to be the best place for our entrepreneurs to start and grow a business.
“If we want to give businesses the headroom to invest and grow, there must be no more business tax increases for the duration of this Parliament.
“Government should incentivise, not hinder, investment in growth.
“We want to see all Government departments working together to reflect the entrepreneurial spirit and creativity of business.”
BORIS Johnson says the Government must be “responsible and sensible” about tax cuts but he should be relentless in his efforts to help families struggling with the cost of living crisis.
British people understand the imperative of getting the country’s finances in order so that a colossal debt burden does not distort the economy for decades to come. It is also vital that families who are appalled at the rising costs of vital goods and utilities are not squeezed to the point of despair.