Stealth raid is set to drag 18 MILLION more Brits into tax system including huge numbers of pensioners… even if Labour doesn't extend threshold freeze beyond 2027
The seven-year freeze on tax thresholds is set to drag nearly 18million people into the system, according to grim figures today.
HM Revenue & Customs estimates, revealed under freedom of information rules, have laid bare the scale of the stealth raid.
It has been the biggest driver of government revenues since Covid, with inflation and pay rising sharply but the level at which tax starts being collected staying the same.
Some 17.9million more will be paying the basic rate of tax by 2027-28 - when the policy is due to end - compared to its introduction in 2021-22.
They are likely to include large numbers of retired Brits, as the state pension rises above the level of the personal allowance.
Around 12million people will have been pulled into the higher rate of tax over the period, the details obtained by financial consultants Quilter indicate.
The process of 'fiscal drag' is expected to gather pace in between this year and 2027-28, with 11.6million entering the tax system.
There are also fears that the situation could get even worse if Rachel Reeves extends the freeze again.
Although she stopped short of doing so at the Autumn Statement, the Chancellor is facing a major battle to balance the government's books as the economy stalls and Donald Trump's trade war causes mayhem.
Around 5.4million those expected to be brought into the tax system would be aged over 60, and 3.4million over 70.
The OBR previously estimated that the freeze would bring in an extra £29billion for the Treasury by 2027-28, roughly equivalent to 4p on the basic rate of income tax.
It suggested 3.2million more would be paying income tax than if the thresholds had been indexed to inflation.
Rachael Griffin, tax and financial planning expert at Quilter, said: 'The number of people expected to pay income tax for the first time, or at a higher rate, by 2027-28 is set to rise exponentially due to the continued freeze on tax thresholds.
'Initially introduced in the 2021-22 tax year until 2025-26, the freeze was expected to bring 1.3million more people into paying income tax and one million more into paying at the higher rate.
'Now, however, the extended freeze until 2027/28, combined with higher wages, will see almost 18million people paying income tax and 12million paying at the higher rate.'
She added: 'Regardless of any extension, the lengthy freeze is resulting in a significant tax rise by stealth.
'As incomes rise, including state pension income, more people are being dragged into paying tax for the first time or into higher tax brackets, a phenomenon known as fiscal drag.'
A Treasury spokesman said 'This government inherited the previous government's policy of frozen tax thresholds.
'At the Budget and the Spring Statement, the Chancellor announced that we would not extend that freeze.
'We are also protecting payslips for working people by keeping our promise to not raise the basic, higher or additional rates of Income Tax, employee National Insurance or VAT.
'That's the Plan for Change - protecting people's incomes and putting money into people's pockets.'
There are fears that the situation could get even worse if Rachel Reeves (pictured last week) extends the freeze again
