Yahoo Finance UK households could pay £3,500 more in tax by next election, warns IFS
Rishi Sunak government to preside over the biggest tax rises since records began
A tax rise equivalent to around £3,500 more per household is expected by the next general election, according to the Institute for Fiscal Studies (IFS).
It said the potential tax hike would amount to around 37% of national income, up from around 33% in 2019 and noted the UK government would be raising upwards of £100bn more in tax revenues each year as a result.
The IFS also highlighted that since comparable records began in the 1950s, no parliament has presided over a bigger increase in taxes.
The group noted that only during and in the immediate aftermath of the two world wars have government revenues grown by as much as they have in the period since 2019.
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However, the government could decide to announce tax cuts in the run-up to the next election, which would of course alter the IFS projections.
Ben Zaranko, senior research economist at IFS, said: ‘It is inconceivable that this parliament will turn out to be anything other than a tax-raising one – and it looks nailed on to be the biggest tax-raising parliament since at least the Second World War. This is not, for the most part, a direct consequence of the pandemic.
“Rather, it reflects decisions to increase government spending, in part driven by demographic change, pressures on the health service, and some unwinding of austerity. It is likely that this parliament will mark a decisive and permanent shift to a higher-tax economy.”
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Meanwhile, Mark Franks, director of welfare at the Nuffield Foundation, said demographic change combined with slow economic growth is creating an almost inevitable increase in tax revenues as a share of gross domestic product (GDP).
“There will be strong pressure in coming parliaments to raise taxes further to meet growing demand for public services such as healthcare. Future governments must not only have a credible and robust strategy for the economy and the public finances, but should also be forthright and transparent about the difficult trade-offs they will face.’
The next UK general election is scheduled to be held no later than 28 January 2025.
What did Jeremy Hunt previously say on tax rises?
During his last budget speech in March, chancellor Jeremy Hunt said the government would put a cap on the amount workers can accumulate in pensions savings over their lifetime before having to pay extra tax.
He also said the tax-free yearly allowance for the pension pot would rise from £40,000 to £60,000 – having been frozen for nine years.
Hunt also froze fuel duty – the 5p cut was kept for another year until April 2024.
Meanwhile, it was announced that alcohol taxes would rise in line with inflation from August, with new reliefs for beer, cider and wine sold in pubs, while tax on tobacco would increase by 2% above inflation, and 6% above inflation for hand-rolling tobacco.
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