A new Institute for Fiscal Studies briefing concludes that the tax burden of personal taxes continues to rise overall due to ‘fiscal drag’ even after taking the recent national insurance contributions cuts into account.
In essence, the report considers the NICs cuts together with the impact of inflation on the frozen income tax personal allowance and basic-rate and higher-rate thresholds (currently frozen until the end of 2027/28). The point being that, as wages rise, more of an individual’s income falls into the higher bands while at the same time inflation eats away at the real value of that income.
The report suggests that, in 2024/25, while the overall effect will vary depending on the individual’s level of earnings, employees earning less than £29,000 a year will almost all lose out while those earning around £50,270 will stand to gain the most.
In the longer term, by 2027/28 the IFS estimates that the overall effect of the frozen thresholds and NICs changes will result in increased tax liability for all employees. Perhaps something for the chancellor to consider in his Spring Budget on 6 March 2024.
A new Institute for Fiscal Studies briefing concludes that the tax burden of personal taxes continues to rise overall due to ‘fiscal drag’ even after taking the recent national insurance contributions cuts into account.
In essence, the report considers the NICs cuts together with the impact of inflation on the frozen income tax personal allowance and basic-rate and higher-rate thresholds (currently frozen until the end of 2027/28). The point being that, as wages rise, more of an individual’s income falls into the higher bands while at the same time inflation eats away at the real value of that income.
The report suggests that, in 2024/25, while the overall effect will vary depending on the individual’s level of earnings, employees earning less than £29,000 a year will almost all lose out while those earning around £50,270 will stand to gain the most.
In the longer term, by 2027/28 the IFS estimates that the overall effect of the frozen thresholds and NICs changes will result in increased tax liability for all employees. Perhaps something for the chancellor to consider in his Spring Budget on 6 March 2024.
