After Wednesday's Budget, the chancellor Rachel Reeves is keen to point out that she hasn't raised taxes for working people, but if you look at the figures, we're all gradually paying more tax due to the government's clever use of fiscal drag. It all began back in 2021 when the Conservative Party froze the thresholds at which you start paying basic-rate and higher-rate income tax.
The manifesto tax pledge has cost working people. Having previously hinted at raising income tax rates, the chancellor chose instead to freeze personal tax thresholds for three more years. A 1p tax rise would have raised the same amount of money but been less costly than freezing thresholds for anyone with an income below 35,000, she said.
The amount of income at which you pay different rates of income tax will still not be increased in line with rising prices. Instead the bands - known as tax thresholds - will stay frozen until 2031. That is three years longer than previously planned. This means any kind of pay rise could drag you into a higher tax bracket, or see a greater proportion of your income taxed than would otherwise be expected.
The UK economy is expected to grow at a slower rate than previously expected from next year, the government's official forecaster has said. The Office for Budget Responsibility (OBR), which maps out how the economy is set to perform based on the government's tax and spending policies, increased its growth expectations for this year, but downgraded its forecast for the following four.
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