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As both the Labour Party and the Conservative Party have pledged not to increase income tax it is likely the vast majority of people will experience tax hikes anyway
Due to the unlikeliness of tax thresholds moving no matter who occupies No.10 post 4 July, it has been predicted the majority of people will be paying more in tax either way.
According to Hargreaves Lansdown, someone earning £30,000 and receiving a pay rise of 4% each year will pay an extra £620 in income tax by the end of the threshold freeze. Thresholds are due to stay frozen until 2028.
All parties running for election have said there is not enough money available to address the issue, however, several have stated their desire to amend them when the time is right.
Sarah Coles, head of personal finance at Hargreaves Lansdown said: ‘Whoever gets elected, there’s a good chance you’ll pay more tax. This isn’t just because of how the maths stacks up on the pledges both main parties have given.
‘It’s also because so many spending cuts have been built into assumptions that unless we get particularly robust economic growth in the near-term, sticking with the fiscal rules may leave the government with a difficult choice between incredibly uncomfortable cuts or painful tax rises.’
‘Neither of the main parties have pledged to tackle frozen income tax thresholds, so regardless of who is elected, anyone who gets a pay rise is likely to face a bigger income tax bill.’
However, the IFS has calculated that someone earning between £24,000-£62,000 and all self-employed people would be better off by 2028 under a Conservative government. For example, someone earning £35,000 in 2028 would pay £260 less than someone earning the same amount today. Additionally, a self-employed person would pay £1,230 less tax incorporating the pledges from the Conservative Party, such as abolishing National Insurance for the self-employed.
Someone earning minimum wage on a full-time contract would be £240 worse off with the proposed changes, and any savings elsewhere could then be offset by other tax raids.
Coles said: ‘Even if you’re better off when it comes to income taxes, you could find it very quickly unwound by other tax rises. Council tax hikes haven’t been ruled out by either party, for example, and a 7% annual rise would add another £675 a year to the average Band D bill.’
‘Savers and investors may be worried about more potential tax because Labour hasn’t ruled out changes to capital gains tax and dividend tax. Meanwhile, neither party has confirmed they’ll be keeping the personal savings allowance.
‘Similarly, while nobody has proposed changes to pensions tax relief or tax-free cash, the Conservatives have ruled it out, but Labour hasn’t.’
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