We have all become familiar with the concept of ‘fiscal drag’ - the government being sneaky in its tax hikes. Instead of changing the rates we pay, it chooses not to raise tax allowances in line with earnings or inflation, so that we all pay more but in a less obvious way.
When Rishi Sunak was chancellor, he used fiscal drag like a sledgehammer, freezing the income tax thresholds, inheritance tax allowance and lifetime allowance for four years until April 2026. Last week, chancellor Jeremy Hunt took a leaf out of Sunak’s book and added another two years to the total, meaning that income tax and inheritance tax thresholds will now stay the same until April 2028. The lifetime allowance was not tampered with this time - more on that later.
With everybody screaming ‘stealth tax’ from the rooftops as an additional £25bn is added to the tax bill, the fact that taxpayers are going to feel the Autumn Statement pain is hardly a secret. But it can be harder to translate that into individual figures.