How strivers on £48,000 will be hardest hit by the Chancellor’s stealth tax raid

Analysis found workers earning £48,000 a year would be more affected by Rachel Reeves’ Budget secret tax than workers earning three times the figure.

The Chancellor has announced plans to extend the freeze on tax thresholds for a further three years, despite having previously ruled out the controversial move.

Ms Reeves has repeatedly claimed she is focused on ensuring those with the ‘broadest shoulders’ pay their ‘fair share’ of tax.

But new analysis of the threshold freeze, the biggest tax-raising measure in the budget, suggests the biggest victims will be middle-income earners, including police officers, senior teachers and nurses.

Research by the Institute for Fiscal Studies has found that someone earning £46,000 a year will pay an extra £410.46 a year in tax until the freeze ends in 2031.

A worker earning £48,000 a year will pay an extra £603.50. By comparison, someone earning £150,000 would pay an extra £393.59.

A worker earning just £12,000 a year will pay an extra £220.15; This is a much higher rate than someone earning ten times their income.

Shadow Chancellor Sir Mel Stride said: ‘Rachel Reeves is trying to deceive Britain. He said the richest would contribute the most, but the biggest tax increase in his budget was a hidden tax that would hit middle-income earners the hardest.

‘This is not an economic necessity, it is a choice; Working people’s pay packets are being raided to fund Labour’s decision to increase its benefit bill.

‘Rachel Reeves wants to look like she’s protecting working people, but in reality she’s punishing them.’

The Treasury highlighted a ‘distribution analysis’ published with the Budget which suggested the top 10 per cent of earners would be the biggest losers when all tax and spending measures, such as the Chancellor’s new ‘mansions tax’, were taken into account.

But the findings underscore the impact of the hidden tax raid in pushing millions of ordinary workers into higher tax brackets.

The freeze on tax thresholds was first introduced by Rishi Sunak in 2022 to help pay off huge debts accumulated during the pandemic. However, what started as a four-year freeze was extended for a further two years by Jeremy Hunt.

Opposition Ms Reeves likened the move to ‘picking the pockets’ of employees.

In his first Budget in 2024, he opposed extending the freeze further, saying it would ‘hurt working people’ and break Labour’s manifesto promise not to increase income tax.

But anemic growth and U-turns on welfare cuts meant he extended the freeze for another three years, until 2031, in the Budget in November.

Experts say the nine-year freeze would be the largest privacy tax in history.

Eventually, an extra 5.2 million low-income earners will be dragged into the income tax system, while 4.8 million middle-income earners will pay the 40p tax rate, which was originally designed to be paid only by the wealthy.