If UK tax thresholds had risen with inflation since 2021, the personal allowance would now be around £15,550 instead of £12,570. The higher thresholds would be closer to £62,000 rather than £50,270!
Looking at Chancellor Rachel Reeves (pictured) Spring Statement, ICAS CEO Gail Boag said: “Freezing tax thresholds has become successive government’s go-to stealth tactic to raise taxes. As wages rise with inflation while thresholds remain the same, more people are pushed into higher tax bands, reducing their take-home pay and leaving households with less to spend across the economy.”
Boag is not wrong! The Office of Budget Responsibility (OBR) has forecast that the UK government’s tax take for 2030/31 will hit a historic high of 43% of GDP. That is up on the 39% of GDP in 2024/25.
She stressed that relying on fiscal drag to raise revenue by default rather than design is not a sustainable substitute for strategy.
Meanwhile, ACCA’s Strategic Engagement Lead for England, Gemma Gathercole, praised the Chancellor’s promise to commit to a single fiscal event in a year. Her concerns were about increases to dividend tax rates and higher CGT on specific reliefs, as well as business rates revaluation. All place yet more negative pressure on small business owners, sole traders, and tax payers.
And, that’s all before Making Tax Digital kicks in in April. Gathercole said: “Combined with the continued hangover from increases to National Insurance Contributions for employers, and the prospects of higher fuel costs, there appears to be little respite ahead for small firms.”
Over at CIMA, CEO Andrew Harding, explained; “We were hoping to see policy stimulation linked to skills, tax reforms and support of SMEs!” That didn’t happen either.
