Tax hikes will cost British families an extra £1,112 a year on average from April, new analysis by Policy Engine for the Institute of Economic Affairs has revealed.
The tax reforms, which are estimated to raise nearly £27 billion for the Treasury, will see income for the wealthiest households drop by £2,729 per year, while poor families face a £796 hit to their finances.
The analysis showed the rise in employer National Insurance from 13.8% to 15% with a lower threshold will cost households an average of £818 per year, while the rise in Capital Gains Tax for basic rate taxpayers from 10% to 18% will add an extra £150 per household.
In addition, the 5% rise in council tax is set to cost families another £96, while the cut in Stamp Duty thresholds will add a further £48.
The Institute of Economic Affairs said the regional impact of the tax changes is starkest in London, where median households will pay an extra £718, followed by the West Midlands. Households in the East Midlands will face the lowest increase at £422.
The reforms, following years of fiscal drag where income tax thresholds have remained frozen, means the UK’s tax burden is set to reach its highest level in history, the think tank said.
Tom Clougherty, executive director at the Institute of Economic Affairs, said: “The tax increases coming into force in April will weigh on household budgets and undermine economic growth. The employers’ national insurance hike is a slap in the face for business, coming hot on the heels of a big corporation tax increase, and alongside an increased minimum wage and more onerous employment rules. Ultimately, though, it will be workers that bear most of the burden in the form of lower wages and fewer opportunities.
“Stamp Duty Land Tax is probably the most economically damaging tax we have, so lowering thresholds and dragging more home purchases into the net is bad news all round. The housing market has enough problems without tax making matters worse.
“We need a concerted effort to reduce the cost of government and move to a simpler, more economically-rational tax system. For now, though, British households are going to continue feeling the pinch.”
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