Should we stop dragging people into taxes originally designed for the rich? This is Money podcast
Almost five times as many people will soon be paying 40 per cent tax than in the early 1990s, when it was seen as a tax bracket reserved for the rich, the Institute for Fiscal Studies warned this week.
It said that fiscal drag triggered by freezing the higher rate tax threshold would pull 7.8million people into its net by 2027.
The study suggested that the threshold would have to be almost doubled from its current level, at £50,271, to almost £100,000 to return the tax band to the level intended for it.
Alongside the report, came an IFS warning on 40 per cent tax, stating that it had stopped being the preserve of high-earning professionals and was now hitting electricians, plumbers, teachers, nurses and more.
The taxman nabbing 40p of every pound earned from a pay rise rather than 20p comes at a time when workers are running to stand still, with inflation at just above 10 per cent.
So, is it time the government stopped taxing by stealth and using tools like fiscal drag – instead raising thresholds with inflation or wages?
And is it time to hike the higher rate threshold and pull people back down to basic rate tax?
On this podcast, Georgie Frost, Lee Boyce and Simon Lambert discuss the thorny issue of tax and who counts as wealthy.
The debate moves on to inheritance tax – another levy designed for the very rich but now hitting the wealthy middle classes. Why is IHT so unpopular when most don’t pay it and does it need reform?
Plus, how much have you lost to inflation, will you get Nationwide’s new £100 Fairer Share bung, and finally, would you buy food two years past its best before date for big savings?