PRESS RELEASE : Squeezed middle facing £20,000 stealth tax hike over next decade [December 2022]

The press release issued by the Liberal Democrats on 30 December 2022.

Squeezed middle earners are facing a staggering £20,000 stealth tax hike over the next decade, new research commissioned by the Liberal Democrats has revealed.

The House of Commons Library analysis shows that someone on a salary of £60,000 will pay an extra £20,440 in income tax over the next ten years due to Jeremy Hunt’s freezing of income tax thresholds. This is equivalent to nearly four months of work going unpaid, or 111 days.

The Liberal Democrats accused the Conservatives of betraying Britain’s hard-working middle, warning that families are facing a “lost decade” of tax hikes and soaring inflation.

The research is based on someone earning £60,000 in 2021/22, whose earnings then rise in line with average earnings growth in subsequent years. It looks at the additional tax paid compared to if income tax thresholds had increased in line with inflation each year, as they would do if the freeze wasn’t in place.

In total, the squeezed middle earner would pay over £134,000 in income tax over the next decade. It means their income tax bill will be almost a fifth higher (18%) than it would have been if the thresholds had not been frozen.

The figures also show that someone on an average salary of around £33,000 will pay an extra £4,040 in income tax due to the freezing of the personal allowance. This is equivalent to six weeks of unpaid work (42 days).

While families are seeing their taxes hiked, the government is giving £18 billion in tax cuts to the banks over the next five years, through a reduction in the bank levy and surcharge.

Liberal Democrat Leader Ed Davey said:

“Britain’s squeezed middle is facing a lost decade of unfair tax hikes and soaring inflation. Families are watching aghast as their paycheques fall while mortgage costs soar. Why should the hardworking middle be forced to pick up the bill for the Conservative party crashing the economy?

“It is deeply shameful that the Conservative government has chosen to slash taxes for the big banks whilst hiking them for the public. This could have all been avoided if the Conservative party hadn’t crashed the economy and sent interest rates spiralling with their botched budget.”