Raising tax thresholds will benefit richest households eight times more than poorest

The chancellor’s decision not to freeze the personal allowances of income tax and national insurance beyond 2028/​29 will provide the richest households with an extra £480 a year compared to the poorest, analysis by the New Economics Foundation (NEF) has found.

Researchers have found that by not extending the freeze on thresholds, the amount people earn before they start paying higher rates of tax, will save the richest 25% of households £550 a year while the poorest quarter will receive just £70 in 2029/​30.

It means low-income families will receive just 6% of the lifting of the measure, which will cost the government £8.6bn, compared to 48% for the highest quartile [Figure 1].

Danny Sriskandarajah, chief executive of the New Economics Foundation, said:

“The chancellor has taken a series of bold measures, from freeing up funding for infrastructure projects to increasing the minimum wage. It is clear the government recognises the need to invest for a thriving, sustainable economy and to make the tax system fairer.

“That is why it is frustrating the chancellor wasn’t more ambitious in transforming our tax system to make it more equitable and support those who need it most. We only saw mild increases in capital gains and carried interest, while landlords will continue to be exempt from national insurance.

“Our analysis shows that the chancellor could have gone much further. The £8.6bn she would have saved from extending the personal allowance freeze could have easily paid for scrapping the two-child limit which keeps families in poverty and holds back our economy in the long run.”

ENDS

Contact
James Rush – james.rush@neweconomics.org

Notes
The New Economics Foundation is a charitable think tank. We are wholly independent of political parties and committed to being transparent about how we are funded.