Stealth Tax to cost families in the East Midlands £800 million by 2026

The Conservative Government's stealth tax raid will cost the average family £420 in the East Midlands a year by 2026, research commissioned by the Liberal Democrats has revealed.

The tax hit will mean a total hit of £800million to taxpayers across the East Midlands.

The new tax hike on households follows the Government's refusal to increase income tax thresholds in line with inflation, which usually takes place each year. This means even more people will earn above the lowest income tax threshold, as well as be forced to pay higher bands of tax.

The Liberal Democrats are demanding that the government drops the stealth tax that will "clobber families who are already feeling the pinch," amid soaring energy bills and the rising cost of living.

The new analysis by the House of Commons Library has found that the freeze will mean 120,000 more people across the East Midlands on low pay will be paying income tax by 2026, while an additional 95,000 people will be dragged into an even higher rate tax bracket. It also shows that household disposable incomes are set to be 1% lower in 2025/26 than they would be if there was no freeze to income tax thresholds.

"The Prime Minister must drop this unfair stealth tax that will hit families across the East Midlands including here in Leicestershire who are already feeling the squeeze.

"With the cost of living already skyrocketing, this is the last thing households need right now."

Liberal Democrat Leader, Ed Davey, said:

"People are already anxious about the rising cost of living and paying their bills this winter. Now they face years of tax hikes under a Tory government that is taking them for granted.

The Commons Library full analysis, including a breakdown by region, is available here.

• The government announced in March 2021 that it would freeze the personal tax allowance at £12,570 and higher rate tax threshold at £50,270 until 2025/26. Based on the OBR's latest inflation forecasts, it is estimated that if the freeze wasn't in place the higher rate threshold would increase to £56,270 in 2025/26, and that the personal allowance would increase to £14,070 in 2025/26.
• It is estimated that the freezes will cost households across the UK (excluding Scotland) around £10.9 billion in 2025/26. This is equivalent to £500 per household by 2025/26. Household disposable incomes are estimated to be around 1% lower in 2025/26 than they would be if there was no freeze to income tax thresholds.
• The situation is different in Scotland, where the starter and basic rate bands of income tax will rise in line with inflation, while the higher and top rates of tax will remain frozen. This will still squeeze the incomes of many including NHS and teaching staff.