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Households pay extra £821 in tax after Tory stealth raid

Britain's Chancellor of the Exchequer Jeremy Hunt walks at Downing Street in London, Britain, November 17, 2022. REUTERS/Toby Melville//File Photo - REUTERS/Toby Melville
Britain's Chancellor of the Exchequer Jeremy Hunt walks at Downing Street in London, Britain, November 17, 2022. REUTERS/Toby Melville//File Photo - REUTERS/Toby Melville

Households have paid an average of £821 more to the Treasury this financial year, according to official figures which will fuel pressure for the Chancellor to cut taxes this spring.

HM Revenue and Customs statistics analysed for the Telegraph reveal the Exchequer raised £553bn between April and December, an annual increase of 10pc.

Senior Conservative MPs said the numbers demonstrate the need for the Chancellor to reduce the burden on families and businesses at his March 15 budget.

The figures reveal that income tax and national insurance receipts, including contributions paid by employers, surged to £281bn in the first nine months of this tax year, a £34bn increase.

It comes as the Government’s spending watchdog warned the country is facing a multi-billion pound hole ahead of the Budget in March.

In a private submission to the Treasury, seen by The Times, the Office for Budget Responsibility told Jeremy Hunt that it plans to revise growth forecasts down by between 0.2 and 0.5pc, owing to weakness in the economy and labour market shortages.

Meanwhile the Government is set to bring in a record amount from inheritance tax with bereaved families having paid out £5.3bn so far.

Experts have said the numbers are on course to surpass the £6.1bn raised in 2021-22, after the Exchequer raked in £545m in December alone.

Revenue from stamp duty also hit an all-time high, with house buyers forking out over £15.7bn, according to numbers crunched by the tax firm RSM.

Analysts said the amount Britons paid in personal taxes including income tax, national insurance, capital gains and inheritance tax soared by 11.45pc to £23bn. When this is averaged out across the 28.1m UK households, the cost per family is an additional £821.

Overall the figures represent the second biggest year-on-year rise in the tax take outside of the Covid pandemic since 2010, when the economy was emerging from the financial crisis.

The figures take into account Mr Sunak's decision while chancellor to freeze income tax thresholds. However, they do not capture the full impact of Mr Hunt’s decision, made in November, to extend the freeze until 2028, which will bring £26bn for the Treasury.

The Office for Budget Responsibility said inflation fuelled wage rises will see 2.6m people start paying tax over the next five years and 3.2m dragged into the 40p bracket.

Senior Tory MPs said the Chancellor should take advantage of the huge tax windfall to slash the burden on businesses "ASAP" and boost the economy, creating more jobs.

Sir Iain Duncan Smith, a former Conservative leader, said: "The Government needs to be making plans to start to move the economy towards growth.

"Tax revenues go up off the back of a growing economy. As inflation comes down, the economy needs a dose of growth otherwise companies will leave.

"With figures like this what we need to be saying is these companies are struggling, we need to help them with lower taxes ASAP."

John Redwood, who was head of the No 10 policy unit under Margaret Thatcher, said Mr Hunt should slash corporation tax and green levies which push up energy costs.

"They’ve got plenty of flex from tax revenues and expenditure items which should mean that yes of course they can afford tax reductions,” he said.

"Grow the cake is what you’ve got to do. The real income hit is too big and we need to ease the squeeze.

"It’s essential we don’t lose the investment and we get behind our businesses. Then there will be more better paid jobs and that’s the way to get people better off.”

Meanwhile official data published Tuesday showed that public borrowing hit a record £27.4bn last month.

The Office for National Statistics (ONS) said the increase was driven by £7bn paid out by the energy support scheme and the soaring cost of servicing the national debt, which rose to £17.3bn.

The watchdog has forecast that the interest bill on Government borrowing will hit £116bn in this financial year alone.

Mr Hunt, who has resisted calls for tax cuts on the basis they could stoke inflation, said the numbers showed the Government must stick to its economic plan.

"Right now we are helping millions of families with the cost of living but we must also ensure that our level of debt is fair for future generations,” he said.

"We have already taken some tough decisions to get debt falling, and it is vital that we stick to this plan so we can halve inflation this year and get growth going again."

But economists challenged the figures, saying most of the £17.3bn of debt repayments will spread out over 18 years and the real cost last month was around £3.6bn.

The figures also come as the Chancellor is understood to be poised to announce that he is bringing forward the raising of the state retirement age to 68 by up to a decade.

Mr Hunt is said to want to make the change, which is currently pencilled in for 2046, from as early as 2035 to save billions more for the Exchequer. 

It also comes as the number of people who are out of work and not actively seeking a job has risen to more than nine million.

One in five adults is on the “economically inactive” list, with the number having risen sharply post-pandemic fuelled by a 500,000 increase in long-term sickness.

Mel Stride, the Work and Pensions Secretary, is carrying out a review into how to reverse that trend to boost productivity and slash the bloated benefits bill.

Duncan Simpson, from the Taxpayers’ Alliance campaign group, said the tax figures were "further proof of the dangerous course taken by HM Treasury".

"Freezing thresholds and bouncing people into higher thresholds is an easy way to increase revenue but is unfair on millions of middle earners.

"This stealth tax should be removed and income tax and national insurance thresholds gradually raised,” he added.

Tom Waters, from the Institute for Fiscal Studies think tank, also suggested the Government revisit its decision to freeze income tax thresholds.

He said: "Given the state of the public finances, it is not entirely surprising that the Treasury is looking for more cash, but this is an opaque and stealthy way to do it.

"The increasing reliance on freezes smacks of lazy policymaking, and the Government should kick the habit."