Rachel Reeves was criticised for appearing to break Labour’s campaign promise not to raise taxes on working people by extending the freeze on income tax thresholds in her second Budget.
The freeze in thresholds will result in 780,000 more basic-rate, 920,000 more higher-rate, and 4,000 more additional-rate income tax payers in 2029/30 as earnings rise over time. Scotland has a separate income tax system.
People are dragged into paying 20% income tax if their earnings rise above £12,570, with the 40% rate from £50,271 and the 45% band from £125,140.
Influential economic think tank the Institute for Fiscal Studies (IFS) said the freeze “clearly represents a tax on working people”.
Defending the plans, Ms Reeves told Sky News: “I do recognise that that will mean that working people pay a bit more. But I’ve kept that contribution to an absolute minimum by closing … a number of tax loopholes and also bearing down on Government spending, on waste and inefficiency.”
