Millions to have wages 'cut' due to big Autumn Statement tax change, Jeremy Hunt confirms | The Sun

MILLIONS of households will be worse off under a huge tax change in today's Autumn Statement.

Chancellor Jeremy Hunt has extended a freeze on income tax and National Insurance thresholds until 2028.

The freeze was meant to come to an end in 2026, but extending this will drag millions more into paying a higher tax rate.

That is because inflation and rising wages will mean more workers will go over the thresholds for paying higher tax.

Speaking in the Commons, the Chancellor said: "I am maintaining at current levels the income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds for a further two years taking us to April 2028."

Thresholds would usually be tweaked to take both of those things into account.


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This means someone on the average UK salary of £33,000 paying almost £2,557 more income tax between now and 2028.

The basic rate of income tax currently kicks in on earnings over £12,571, and the higher rate of 40 per cent at £50,271.

National Insurance is a tax on your earnings and is deducted from your wages each month.

You pay National Insurance if you’re 16 or over and either:

  • an employee earning above £242 a week
  • self-employed and making a profit of £6,725 or more a year

This sneaky stealth tax is expected to bring in £30billion a year by 2026.

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A stealth tax is a form a tax collected in a way that isn’t obvious.

While the government doesn't change the headline rate, you end up paying more money.

Sarah Coles, senior personal finance analyst, Hargreaves Lansdown: "We don’t tend to notice stealth taxes in the same way as a cut, because they only kick in as we get a pay rise.

"It means we lose more of our extra pay – so we’re never actually worse off in nominal terms.

"Of course, once you take inflation into account, it’s another matter entirely.

"With regular pay up an average of just 5.7%, and inflation at over 11%, our wages are already falling behind inflation in real terms, so the taxman taking an extra slice leaves us with an even harder struggle to make ends meet."

It comes after the government kept a cut in the rate of National Insurance contributions – with the average worker benefitting from a £330 pay boost.

The cancellation of the 1.25 percentage point rise has come into effect on November 6.

The initial rise was part of Prime Minister Rishi Sunak's fiscal plan while he was Chancellor. 

How will the income tax freeze affect me?

Put simply, inflation and pay increases will mean more people being dragged into higher bands.

The UK's rate of inflation is currently at a 41-year high of 11.1%, while average total pay, including bonuses, increased by 6% from July to September.

This essentially means that with wages steadily climbing, it means millions more people will become higher rate taxpayers and see a portion of their pay disappear.

Someone with the average UK salary of £33,000 will be paying almost £2,600 more income tax due to the freeze – a 10% increase.

Those earning £50,000, and so hovering just under the current higher-rate threshold, will be hit the hardest.

It is estimated that they will be paying £6,570 more in income tax over the entire period of the tax freeze.

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That represents a 17% increase in their income tax bill over that period.

The Chancellor is also set to announce a pay rise for millions on Universal Credit and benefits next year, as well as a raft of cost of living payments.

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