Fiscal drag to push 8.3 million more Britons into higher tax brackets by 2030

The UK's Office for Budget Responsibility predicts that over 8 million individuals will experience higher income tax burdens by 2030 due to the long-term freeze of tax thresholds. This phenomenon, known as fiscal drag, occurs when tax brackets fail to adjust for inflation or wage growth, pulling more workers into higher tax bands. While some think tanks view this as a stealth tax, others argue it disproportionately affects higher earners. Chancellor Rachel Reeves plans to end the freeze after 2028, but the UK's overall tax burden is expected to reach its highest level in decades before that.

"Fiscal drag occurs when tax bands do not rise in line with inflation or wages, effectively increasing the government's tax take without raising headline rates."

"Chancellor Rachel Reeves has committed to ending the freeze from 2028-29, with forecasts indicating the UK's tax burden will continue to rise until then."

Read at Business Matters