Around 1.3 million more working age adults are to be dragged into paying the higher rate of income tax.

Almost six million will be paying 40 per cent tax on at least some of their earnings by the end of this Parliament.

That’s more than double the number who paid the higher rate back in 2010. The move could raise almost £50billion more in revenue for the Treasury.

Yesterday, two major audits concluded that millions of middle earners will be left worse off thanks to Rishi Sunak‘s decision to put up taxes amid a cost of living squeeze.

A major report by the Institute for Fiscal Studies (IFS) said that the combination of inflation and higher taxes would outweigh any wage increases for those on middle incomes. It warned that middle earners would be around £180 worse off next year compared to their present income.

A separate study by the Resolution Foundation think tank warned that, thanks to the Budget, tax bills for the average household will be £3,000 higher by the end of the Parliament than when Boris Johnson became PM.

The Chancellor delivered his autumn budget statement to the House of Commons on Wednesday.

The Chancellor delivered his autumn budget statement to the House of Commons on Wednesday.

The Chancellor delivered his autumn budget statement to the House of Commons on Wednesday.

Mortgages are ALREADY getting more expensive: NatWest, HSBC and Barclays ALL put up rates just hours after Budget 

Mortgage interest rates already started going up yesterday amid warnings that Britain’s homeowners face soaring payments in the coming year – with brokers advising them to make overpayments now while rates are still low.

Barclays said today it was hiking rates by up to 0.35 percentage points on a range of fixed-rate mortgages and Halifax today announced rises of up to 0.20 percentage points on a handful of products from November 1.

HSBC also said its rates would go up, and NatWest has increased rates on a range of its fixed deals by 0.1 per cent since Chancellor Rishi Sunak spoke yesterday, and TSB said they would be increasing their rates tomorrow.

One expert said it was ‘another, unwanted squeeze on the family budget’, while another said homeowners should get on a fixed rate now, with those on a variable rate expected to feel the impact of inflation the greatest.

Forecasts produced by the Office for Budget Responsibility (OBR) alongside Mr Sunak’s Budget yesterday suggested homeowners will have to prepare for the biggest hike in interest payments since the financial crisis.

This is because, according to the Treasury-funded public body, rising inflation may prompt the Bank of England to put up interest rates from the current 0.1 per cent to 0.75 per cent by the end of 2023. The OBR also said that in a worst-case scenario, interest rates would hit 3.5 per cent by then. 

The forecasters said even a 0.75 per cent interest rate would have a huge knock on effect on the amount of interest mortgage payers have to pay.

They said that it would see the amount paid in mortgage interest soar by 13 per cent in 2023 – followed by another rise of 5.4 per cent the year after.

See the full report here.

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The conclusions came a day after the Chancellor unveiled his Budget alongside official forecasts which showed the overall tax burden rising to its highest level since the 1950s.

At the same time, the Office for Budget Responsibility warned that the cost of living could rise at its fastest rate for 30 years. It predicted that inflation could jump from 3.1 per cent now to around 4 per cent in 2022, a development that could see interest rates – and mortgages – soar.

Yesterday, Paul Johnson, director of the IFS, said: ‘Over the next several years a combination of tax increases and high inflation will mean very slow growth in living standards.

‘The worry for the government is that, for all the Chancellor’s upbeat delivery, the voters may not get much feel-good factor.

‘A middle earner is likely to be worse off next year than this as high rates of inflation and tax rises more than negate small average wage increases.’

According to the IFS, 5.9 million people will have to fork out the higher rate by the end of this Parliament – up from just 2.6 million when the Tories came to power in the coalition in 2010.

The 40 per cent higher rate was originally introduced to capture the very top earners in the country. Thirty years ago, just 1.7 million people fell into the 40 per cent bracket.

But that number is set to soar after the Chancellor vowed to freeze the income tax thresholds until 2026, rather than increasing them in line with inflation.

Anyone whose earnings rise above £50,271 over the next five years will have to pay 40 per cent tax on anything above that amount. On anything above £150,000, they will have to pay the additional rate of 45 per cent.

The move, dubbed a ‘stealth tax raid’ by experts, means that 1.3 million more people over the next three years will be dragged into paying the higher rate of income tax as workers see their wages rise but the threshold does not. Currently around 8.5 per cent of the working population, or 4.6 million people, pay the higher rate.

A worker on just £25,000 will end up paying £1,101 more in additional income tax between the 2022-23 financial year and 2026-27, as they fall into the frozen thresholds in a phenomenon known as fiscal drag.

By freezing the income tax thresholds until 2026 – including the lower levels, meaning people on more modest salaries will also be dragged into higher tax brackets – Mr Sunak is forecast to raise a total of £47 billion.  

Tory Brexiteers’ fury as UK financial watchdog claims Brexit will have a bigger impact on the economy than the Covid crisis 

Tory Brexiteers have rejected the UK financial watchdog’s prediction that leaving the EU will have a bigger negative impact on the British economy than the coronavirus crisis in the long term. 

Richard Hughes, the boss of the Office for Budget Responsibility, said the assumption is now that leaving the EU will ‘reduce our long run GDP by around four per cent’. 

He added to the BBC: ‘We think that the effect of the pandemic will reduce that (GDP) output by a further two per cent.’

The comments were slapped down by pro-Brexit Tory MPs who questioned the accuracy of the OBR’s predictions. 

Tory MP Marcus Fysh said: ‘The OBR is not famed for being able to forecast any more than a few months in advance.’

He added: ‘They have a particularly bad record of predictions. I wouldn’t set any stall by what they say on that front.’

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The money will go towards his generous spending plans, funnelling cash to Government departments such as education and justice which have been starved of funding for over a decade.

Harry Fone, of campaign group the TaxPayers’ Alliance, said: ‘Taxpayers will be rightly furious that they find themselves in the higher rate tax bracket. The Conservatives claim to be the party of lower taxes but time and time again they’ve hammered hard-working people.’

The IFS’s analysis yesterday said that over the next 12 months, middle earners – those on around the median salary of £25,000 – will lose out. Once taxes are taken off, their pay will fall by about 1 per cent, or £180 per year, after inflation.

Wages have remained stagnant since the 2008 financial crisis, and the IFS said this will probably continue for a few more years.

It means Britons face an ‘unprecedented’ 20 years of wages staying at the same level.

The IFS said the average worker earns £13,000 less today than they would have done if earnings had kept pace with pre-crisis predictions made in 2008.

If the forecasts had come to pass, someone earning £30,800 today would be taking home £43,700 instead.

The figures contained in the IFS report did not match the upbeat tone of Mr Sunak’s Budget speech on Wednesday, when the Chancellor claimed he was ‘ushering in a new age of optimism’.

Mr Johnson said voters ‘may not get much feelgood factor’ with high inflation, rising taxes and poor growth.

He said these factors will see living standards ‘barely rising and, for many, falling over the next year’.

The IFS's analysis yesterday said that over the next 12 months, middle earners - those on around the median salary of £25,000 - will lose out. Once taxes are taken off, their pay will fall by about 1 per cent, or £180 per year, after inflation

The IFS's analysis yesterday said that over the next 12 months, middle earners - those on around the median salary of £25,000 - will lose out. Once taxes are taken off, their pay will fall by about 1 per cent, or £180 per year, after inflation

The IFS’s analysis yesterday said that over the next 12 months, middle earners – those on around the median salary of £25,000 – will lose out. Once taxes are taken off, their pay will fall by about 1 per cent, or £180 per year, after inflation

James Smith, research director for the Resolution Foundation said that by 2026/27 the tax take will be at the highest level since 1950

James Smith, research director for the Resolution Foundation said that by 2026/27 the tax take will be at the highest level since 1950

James Smith, research director for the Resolution Foundation said that by 2026/27 the tax take will be at the highest level since 1950

A report by the Resolution Foundation think tank claimed that tax bills for households will be £3,000 higher since Boris Johnson entered Number 10

A report by the Resolution Foundation think tank claimed that tax bills for households will be £3,000 higher since Boris Johnson entered Number 10

A report by the Resolution Foundation think tank claimed that tax bills for households will be £3,000 higher since Boris Johnson entered Number 10

Pack of cigarettes goes up by 88p to £13.60 TODAY after Chancellor hiked tobacco tax 

A pack of cigarettes now costs more than £13 after the Chancellor decided to increase tobacco tax.

The most expensive 20-pack jumped by 88p to £13.60 while the cheapest pack rose by 63p to £9.73, , according to Rishi Sunak’s Budget yesterday.

Simon Clark, director of the smokers’ group Forest, said: ‘Smokers are sick and tired of being targeted every year with above inflation increases in tobacco duty.

‘The majority of smokers come from poorer backgrounds. Many have suffered financially as a result of the pandemic and should not have to face yet another increase in the cost of tobacco at a time when they can least afford it.’

He added: ‘Increasing the rates of tax on tobacco will inevitably encourage illicit trade which hurts legitimate retailers and puts consumers at even greater risk from unregulated and counterfeit tobacco.’ 

Duty rates on all tobacco products will increase by the Retail Price Index measure of inflation plus 2 per cent, Chancellor Rishi Sunak announced.

Hand-rolling tobacco will increase by RPI plus 6 per cent meaning a 30g bag will now cost over £9.02.

The minimum excise tax will go up by RPI plus 3 per cent. The changes came into effect at 6pm last night.

Ministers hope that the move will reduce the number of people smoking.

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With the possibility of inflation hitting the highest level in three decades, he warned that ‘millions will be worse off in the short term’.

Mr Johnson said welfare payments will rise by around 3 per cent, while inflation could be 5 per cent.

‘That will be a real – if temporary – hit of hundreds of pounds a year for many benefit recipients,’ the director added.

‘We are not at 1970s levels of inflation but we are now experiencing enough inflation that real pain will be felt as low-income households – most of whom have little in the way of financial assets – wait more than a year for their incomes to catch up.

‘For some in work that may never happen.’

Meanwhile a separate report by the Resolution Foundation think tank claimed that tax bills for households will be £3,000 higher since Boris Johnson entered Number 10.

It said wages are also unlikely to rise in real terms this year due to high inflation and will only increase by around 2.4 per cent between the financial crisis in 2008 and 2024, compared with a one-third rise recorded in the 16 years prior to 2008.

James Smith, the Foundation’s research director, said that by 2026/27 the tax take will be at the highest level since 1950.

‘We’re becoming a bigger state and more higher tax state,’ he said. The total increases in taxes since Boris Johnson has become Prime Minister is equivalent to around £3,000 for each household in the UK, so this is a really chunky change, although most of that falls on people on higher and middle incomes.’

‘Slow growth is really casting a shadow over what’s happening in terms of the overall health and outlook and household finances are still in pretty bad shape and a huge challenge.’

Downing Street said the Foundation’s per-household calculation was unfair as it included rises to corporation tax and others not paid by individuals.

RUTH SUNDERLAND: How YOU are funding the bill for Rishi Sunak’s big spend

By Ruth Sunderland for the Daily Mail

The Tories are meant to be the natural party of middle class values: thrift, enterprise, low taxes and a small state.

Rishi Sunak has wandered a very long way from those principles.

The reality he faces is that the size of the public sector has swollen to nearly half the total economy. Not only that, but taxes are rising to their highest level in relation to national income since the 1950s.

But the full scale of the tax raid on the middle classes was not immediately apparent when Rishi delivered his Budget. Stealthy measures, some announced previously, were overshadowed by cheery tax cuts on beer and prosecco and the Chancellor’s tone was breezily optimistic.

The sobering truth, however, is that Middle Britain will be able to afford far less of its favourite fizz because Rishi is purloining billions from their pay-packets, pensions, investments and inheritances.

The reality Rishi Sunak faces is that the size of the public sector has swollen to nearly half the total economy. Not only that, but taxes are rising to their highest level in relation to national income since the 1950s (Stock image)

The reality Rishi Sunak faces is that the size of the public sector has swollen to nearly half the total economy. Not only that, but taxes are rising to their highest level in relation to national income since the 1950s (Stock image)

The reality Rishi Sunak faces is that the size of the public sector has swollen to nearly half the total economy. Not only that, but taxes are rising to their highest level in relation to national income since the 1950s (Stock image)

Rishi is purloining billions from Middle Britain's pay-packets, pensions, investments and inheritances (Stock Image)

Rishi is purloining billions from Middle Britain's pay-packets, pensions, investments and inheritances (Stock Image)

Rishi is purloining billions from Middle Britain’s pay-packets, pensions, investments and inheritances (Stock Image)

£85bn NI grab

The so-called health and social care levy was unveiled a month ago but the full damage is only spelled out on page 133 of the Budget Red Book.

Previously, it was thought the 1.25p in the pound hike in National Insurance from April 2022, would cost employees, some pensioners and investors a total of £12billion a year. In reality, it turns out that Rishi is filching more than £16billion a year from our pockets, rising to nearly £18billion in tax year 2026/7.

In total, he will squeeze more than £85billion over six years out of long-suffering taxpayers before rebates. A middle-class professional on £50,000 a year will pay an extra £505 and someone on £80,000 will pay an additional £880.

£3bn divi damage

Tax on share dividends will also rise by 1.25p in the pound as part of the health and social care levy. This will raise a total of £3.2billion by 2026/7 for the Exchequer at the expense of savers, many of whom rely on dividends to fund their retirement. Fortunately Rishi left untouched the tax-free allowance of £2,000 a year on dividend income.

But he froze the maximum tax-free limit of £20,000 a year for ISA subscriptions which will yield £50million for government coffers by 2026/7, to the detriment of small savers and investors. The Treasury will also snatch another £65million in extra taxes on profits from the sales of property, shares and other assets, by freezing the capital gains tax allowance.

£19bn Big Freeze

Rishi pledged not to increase income tax rates but he has found other ways of extracting more out of pay packets.

One sneaky but highly effective method is ‘fiscal drag’, which simply means not raising tax-free allowances or higher rate thresholds in line with inflation. As a result, people pay more tax, and the real spending power of their salaries dwindles.

The so-called health and social care levy was unveiled a month ago but the full damage is only spelled out on page 133 of the Budget Red Book (Stock Image)

The so-called health and social care levy was unveiled a month ago but the full damage is only spelled out on page 133 of the Budget Red Book (Stock Image)

The so-called health and social care levy was unveiled a month ago but the full damage is only spelled out on page 133 of the Budget Red Book (Stock Image)

In his April Budget, Rishi froze for five years the tax-free personal allowance for income tax at £12,570 until April 2026.

He is also fixing the threshold at which people start to pay higher rate tax at £50,270, over the same time frame. This will cost Britons a total of more than £19billion by 2025/6.

The effects of ‘fiscal drag’ are particularly worrying at the moment, when economists fear inflation is about to take off. The more it does so, the more the tax freeze will hurt.

Another way this cunning move wrings out more tax is by pulling more people into higher rate tax brackets.

In 1990, only 1.7million people or 4per cent of the working population paid higher rate tax at 40per cent. That has risen to 4.6milllion now.

The costs to pensioners of the controversial decision to break the state pension ‘triple lock’ have been laid bare in the Budget papers (Stock Image)

The costs to pensioners of the controversial decision to break the state pension ‘triple lock’ have been laid bare in the Budget papers (Stock Image)

The costs to pensioners of the controversial decision to break the state pension ‘triple lock’ have been laid bare in the Budget papers (Stock Image)

By the end of the current Parliament, nearly 6million of us –or 11percent of working age adults – will be on higher rate tax, more than double the number when the Tories came to power in 2010.

Extra death tax

Families hoping to leave a legacy to loved ones have also been affected by the freeze. The ‘nil rate band’ on which no tax is payable has been frozen until April 2026 at £325,000, a level that drags many modest homeowners into the net.

As the value of property goes up – and house prices have risen strongly in the pandemic – more grieving relatives will be hammered by tax on their loved one’s estate.

The Office for Budget Responsibility expects the annual number of estates paying inheritance tax will almost double in the next five years, from 25,400 in 2020-21 to 47,700 by 2026. Thankfully, you can still pass assets on to a husband, wife, or civil partner with no inheritance tax charge.

£30.5bn OAP pain

The costs to pensioners of the controversial decision to break the state pension ‘triple lock’ have been laid bare in the Budget papers.

The lock – under which state pensions had to rise every year by whatever figure is greatest out of consumer price inflation, wage inflation or 2.5per cent – has been suspended, supposedly temporarily.

This was because the rate of wage increases was distorted by Covid-19 effects and was running at around 8per cent.

Suspending the lock will save the Treasury around £30.5billion over five years, but will deprive pensioners of income many can ill-afford to lose.

SIMON WALTERS: Why I believe this Budget means Boris Johnson will go to the polls in less than two years 

By Simon Walters for the Daily Mail

Until it was banned in the 19th century, politicians regularly bribed people to vote for them with free drinks. 

A cynic might say Boris Johnson’s Budget suggests he is planning to do just that.

Pub landlords were quick to complain that the cut in alcohol taxes announced by his Chancellor Rishi Sunak does not come into effect until February 2023.

That’s a long time to wait for a drink – but perfectly timed if you want to win popularity going into a General Election. 

And what better way of doing it than by cutting the cost of booze a few months beforehand?

The Budget has convinced many Tory MPs that the Prime Minister is planning to call an election at least a year ahead of the December 2024 deadline. 

Chancellor of the Exchequer Rishi Sunak and Britain's Prime Minister Boris Johnson at the House of Commons on Wednesday

Chancellor of the Exchequer Rishi Sunak and Britain's Prime Minister Boris Johnson at the House of Commons on Wednesday

Chancellor of the Exchequer Rishi Sunak and Britain’s Prime Minister Boris Johnson at the House of Commons on Wednesday

Indeed, such was the scale of the multi-billion-pound giveaway that, extraordinarily, the talk among Tory MPs in the Commons tea room yesterday was of a possible 2022 election.

I don’t think any prime minister, not even an arch risk-taker like Boris Johnson, could get away with that. 

However I do believe the General Election could be less than two years away.

I see the decision of the Prime Minister and Chancellor to conspicuously withhold £20billion of the £50billion ‘windfall’ in Treasury coffers generated by stronger than expected growth and the rise in national insurance as further evidence of this.

The imminent abolition of the Fixed Term Parliament Act, introduced by David Cameron and Nick Clegg’s coalition administration, means that Mr Johnson will have the luxury of being free to call an election whenever he pleases –within the maximum five-year parliamentary term.

This political trump card was used to great effect by the two most powerful prime ministers of the past 50 years, Margaret Thatcher and Tony Blair.

Both chose twice to go to the polls after four years and won convincingly each time. Two of the weakest prime ministers, John Major and Gordon Brown, held on until the last minute – and lost.

Boris Johnson pictured leaves Downing Street on Thursday. Simon Walters believes a General Election could be less than two years away

Boris Johnson pictured leaves Downing Street on Thursday. Simon Walters believes a General Election could be less than two years away

Boris Johnson pictured leaves Downing Street on Thursday. Simon Walters believes a General Election could be less than two years away

Delaying until the full five years is up increases the risk of a sudden crisis hitting a party’s prospects –with no electoral escape hatch.

The timing of the December 2019 Brexit crisis poll has thrown the usual UK election cycle out of kilter. General elections are customarily held in the spring, or sometimes autumn. 

But a 2024 election would leave Mr Johnson dangerously little wriggle room if the Government is unexpectedly blown off course. 

And for all the trademark ‘boosterism’ he displays in interviews there is a growing consensus –shared privately by many ministers – that the post-pandemic recovery will have petered out by 2024.

By calling an election in the spring of 2023, or possibly the autumn, after constituency boundary changes giving the Tories up to an extra ten seats come into effect, Mr Johnson avoids that peril.

If he won, cheered on by voters in former Labour ‘Red Wall’ seats supping pints of subsidised ‘Boris beer,’ and Middle England Tories placated by tax hand-outs, he would be secure in Downing St until 2028.

Aged 64 by then, he would have served a highly respectable nine years in power with more than enough time and energy left to earn the fortune he craves by writing books and speaking on the after-dinner circuit.

I am told that Conservative officials are drawing up plans to select candidates for the next election ahead of schedule to be ready for an early election. 

One veteran Conservative figure put it bluntly: ‘We have to call an election before the **** hits the fan in ’24-25.’

The worst of all options for a prime minister is to foster such speculation – and then chicken out as Gordon Brown did after allowing his aides to talk up an early election in 2008.

He was forever branded a ‘bottler’. Gambler Boris Johnson is less of a bottler, more of a bolter – in more ways than one.

Intriguingly, I am told that Isaac Levido, the Australian polling guru who engineered Mr Johnson’s victorious 2019 election campaign, has been going out of his way to dampen talk of a 2023 contest.

That doesn’t mean that it won’t happen.   

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