Vote Labour, Vote Conservative. Whatever you do, your tax bill is going up.
It’s become a standard promise in every election campaign — no rise in Income Tax, National Insurance or VAT. It sounds reassuring — your taxes won’t rise. Except that’s not true.
While Rishi Sunak was throwing around his profoundly questionable claim that Labour is plotting a £2,000 tax raid on family incomes, he had less to say on the thousands of pounds in additional tax he’s taken from millions of families over the past three years.
Why isn’t Labour screaming and shouting about this? Because it’s planning to do exactly the same thing.
As Chancellor, Sunak froze tax thresholds in 2021 — the amount you’re allowed to earn before paying income tax. Initially for five years, Jeremy Hunt extended the freeze to 2028 — and Labour says it will stick to that plan.
What does that mean? Take someone on £20,000 a year. Their income tax bill would be just under £1,500. Let’s say that, three years later, their income has risen to £22,500. Because tax thresholds have been frozen, their tax bill is now just under £2,000.
Their income is up 12.5%, but their tax bill has risen by 33% — an extra £6 a week, or £315 a year, they would have kept if the threshold rose at the same rate as their income.
Extra tax paid on a relatively low income to a government that insists it isn’t raising taxes.
What about a higher earner — someone on £48,000. They would pay just over £7,000 in income tax. Three years later, a 12.5% increase in income would take them to £54,000 — and drag them into the higher, 40% bracket.
Their income tax bill would rise by 27% — costing them more than £1,000 a year. If thresholds had risen at the same rate as their income, they wouldn’t be paying the higher rate.
It’s called fiscal drag — and to be honest it’s all a bit complicated. Far harder to understand than just putting an extra penny or two on the basic rate of tax, and far less politically damaging, but the impact on your income is the same. It’s a rise in the amount of tax you pay on your income.
Which is why both the Conservatives and Labour will continue with the freeze until 2028, and why — regardless of who wins the election, your tax bill will rise.
The Tories will point to a cut in National Insurance, which Labour says it will not reverse. But that is dwarfed by the ongoing, annual impact of dragging more and more people into paying an ever-higher proportion of their income in tax — more than 2-million new higher rate tax-payers, and 3-million dragged into paying income tax for the first time.
As Paul Johnson, director of the Institute for Fiscal Studies, put it:
“Tax has risen to a higher fraction of national income than it has ever been in my lifetime, and I don’t expect it to return to its previous level for the rest of my lifetime.”
He’s also accused both sides of failing to be honest with voters about the real state of the economy:
“Government and opposition are joining in a conspiracy of silence in not acknowledging the scale of the choices and trade-offs that will face us after the election.”
There may be strong arguments for raising taxes, both to reduce debt and invest in public services on their knees after more than a decade of often chronic under-funding — but neither party wants to have that debate with voters.
Instead they promise better days ahead with no cost to pay — terrified of confronting voters with the reality that, whoever wins this election, there are bad times just around the corner.
