Rishi Sunak is considering implementing a £6billion ‘stealth’ tax by freezing personal income tax allowances in next month’s Budget, reports claim today.
The Treasury could abandon annual increases to the £12,500 and £50,000 income tax thresholds, which the Telegraph reported would see tens of millions of Britons handing over more cash to the government.
These thresholds – which determine how much a person can earn without paying income tax and which Britons pay the higher 40 per cent rate – are typically expected to rise with inflation each year.
However, if these increases don’t go ahead, millions of people will be forced to pay a much higher tax rate on a larger proportion of their income.
This could amount to the loss of an annual £250 saving by 2025, it was said.
As no tax rates are being increased, this scenario is often dubbed a ‘stealth tax.’
A Treasury insider, who is working on the Budget, described the potential decision as ‘quite logical,’ while Boris Johnson’s former chief business adviser welcomed the idea.
Andrew Griffith added: ‘In a world where tough choices will have to be made, the best form of those are ones that are the most broadly based.
‘A freeze in allowances would be amongst them.’
It was suggested the measure will be announced in the Budget on March 3, which is expected to set out the next phase of the Chancellor’s plan to protect jobs amid the pandemic in Britain.
A Treasury spokesman told the Telegraph: ‘We do not comment on future tax policy outside of fiscal events.’
It comes after data revealed Rishi Sunak’s Eat Out To Help Out scheme only boosted footfall by 5.7 per cent in cafes and restaurants – and had no impact on the days it was not running.
The scheme ran from August 3 to 31 and offered customers 50 per cent off up to a maximum of £10 per person on Mondays, Tuesdays and Wednesdays.
The government-subsidised arrangement was open to all food businesses registered before July 7 but only 25 per cent used it.
The Treasury recently revealed the scheme – launched as a life jacket for a drowning hospitality sector – cost taxpayers £849million after soaring over budget.
Economists from the London School of Economics and What Works Centre for Economic Growth found the impact of Eat Out To Help Out was minimal.
Nicolás González-Pampillón, Gonzalo Nunez Chaim and Katharina Ziegler said it only helped the industry on the days discounts were available.
They wrote: ‘We show that EOTHO induced 5-6 per cent more people to visit retail and recreation venues than would have been expected, and this rise was concentrated on specific days when the discount was available (Mondays to Wednesdays in August).
‘However, the programme failed to encourage people to go out for other purposes or to eat out after the discount ended.’
By retail and recreation venues the authors mean restaurants, cafes, shopping centres, theme parks, museums, libraries and cinemas.
The authors compared footfall in August with the average footfall between January 3 and February 6 last year – before the coronavirus pandemic closed restaurants.
