"There was no rise in the rate of income tax. Still, the Budget is likely to push up your tax bill before the end of this parliament. That's because the chancellor has opted to freeze tax thresholds - the point at which you start to pay tax, and the point where you tip into paying a higher rate of tax - for another three years. This is often dubbed a stealth tax because, unlike raising the headline rates, it is not obvious on your payslip."
"It will hit you hardest if your income is close to one of the tax thresholds, but anyone who gets a pay rise will be affected, as long as you earn enough to pay tax. About a million people who currently don't earn enough to pay income tax will be drawn into paying tax as soon as their earnings inch above the 12,570 threshold."
The chancellor froze income tax thresholds for another three years, keeping the point where people start paying tax and higher-rate tax unchanged. Freezing the thresholds acts as a 'stealth tax' by increasing tax liabilities as wages rise without headline rate changes. Around one million people currently below the personal allowance will be pulled into paying income tax as earnings pass the 12,570 threshold, affecting some state pensioners and part-time minimum-wage workers. Scotland's tax-free allowance will also be frozen while National Insurance contribution thresholds are being held steady. As wages inflate, more income will be taxed and more earners could move into the 40% bracket.
Read at www.bbc.com
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