addons-for-divi domain was triggered too early. This is usually an indicator for some code in the plugin or theme running too early. Translations should be loaded at the init action or later. Please see Debugging in WordPress for more information. (This message was added in version 6.7.0.) in /home/sites/10b/1/19c32e6dee/public_html/wp-includes/functions.php on line 6260Part 3, Chapter 7 ITEPA 2003 sets out the provisions that deal with taxable cheap loans to employees. In order for Chapter 7 to apply, the loan needs to be an ‘employment-related loan’ which is defined in section 174 ITEPA 2003. It requires that the loan is made to an employee or a relative of an employee (s174(1) ITEPA 2003).
As to whether the client or her father is an employee, one should also consider whether there is any scope that either of them could arguably be a director as defined under s67 ITEPA 2003 (see also HMRC manual EIM20200). If the criteria in s174 ITEPA 2003 is not met, then there would be no benefit in kind charge under Chapter 7.
However, although not chargeable as a benefit in kind on the employment front, we need to consider whether s1064 CTA 2010 would be in point to trigger a distribution charge.
Section 1064 CTA 2010 deems the close company as having made a distribution to a participator if the company incurs expenditure in the provision of certain benefits for them. Benefits in this case would include the interest-free loan that the company has made.
Firstly, we should look to see whether the client’s father would fall within the definition of ‘participator’. Section 1069 CTA 2010 extends the meaning of participator to include associates of the participator for the purposes of s1064 CTA 2010.
Your client, owning 25% of the shares in the close company will be a participator under s454 CTA 2010 and as her father will fall within the meaning of ‘relative’ (s448(2)(b) CTA 2010), he will be an associate of a participator. Therefore, there will be a distribution deemed to have been made by the company.
The company is treated as making a distribution to the participator (s1064(2) CTA 2010) and any references to a participator in s1064 also include an associate of a participator (s1069(1)). This would suggest that the distribution is treated as if it was made to the father. We need to keep in mind that this is from the company’s perspective and for the purposes of the Corporation Tax Act.
For the charge to income tax on distributions, s385 ITTOIA 2005 sets out the person liable to the charge as any person whom any distribution is made or treated as made, or the person receiving or entitled to the distribution. This indicates that the income tax charge is likely to be levied on the father as the recipient. HMRC manual SAIM5020 also suggests that HMRC is of this view as well.
The quantum of the deemed distribution is determined using the same method we would use to ascertain the beneficial loan charge amount for an employee/director under Chapter 7, Part 3 ITEPA 2003. This is not the loan amount that has been advanced to the father, but the cash equivalent of the benefit that is charged to tax.
Of course, should the participator make good the full amount of the cash equivalent as determined above, then there would be no amount treated as a distribution to the participator.
In summary, there is no benefit in kind charge applicable to your client, however, to the extent the expense is not made good, there is a deemed distribution charge on the father. As an aside, although not part of the query, I should mention that the company should consider any liability under s455 CTA 2010 if not already done so.
About the author
Source: http://www.accountancydaily.co/qa-tax-liability-loan-shareholder
]]>The launch of a social care levy from 2022 will see taxpayers facing a 1.25% tax charge under government plans, while dividend tax will also rise.
From April 2022, the government will introduce a new, UK-wide 1.25% Health and Social Care Levy, ringfenced for health and social care. This will be based on National Insurance contributions (NICs) and from 2023 will be legislatively separate.
All working adults, including those over the state pension age, will pay the levy and the rates of dividend tax will also increase by 1.25% to help fund this package.
There will also be changes to the amount of savings people can retain when facing a move into care costs and a cap on total cost liability for anyone paying for care home accommodation and care.
The new tax is set to raise £12bn a year and marks a major departure from the Conservatives’ manifesto which committed to the triple lock on income tax, national insurance and VAT.
Further details can be found at http://www.gov.uk/government/news/record-36-billion-investment-to-reform-nhs-and-social-care.
]]>The tax authority has announced that it will not give out financial penalties for late filing and late payments for self assessment tax returns which will give more time for taxpayers to complete and submit 2020-21 tax return online and pay any tax due.
The deadline to file and pay remains 31 January 2022 however the extension of the deadline means that anyone who cannot file their return by the end of January will not receive a late filing penalty if they file online by 28 February.
The waiver also means that anyone who cannot pay their self assessment tax by the January deadline will not receive a late payment penalty if they pay their tax in full, or set up a time to pay arrangement, by 1 April. HMRC states that interest will still be payable from 1 February as usual.
Figures show that 12.2m taxpayers still need to submit their tax return by 31 January 2022 with 6.5m already having done so.
HMRC states that it recognises the pressure faced by taxpayers and their agents this year with the Covid-19 Omicron variant and has halted the penalties to help ease the worry of receiving a fine however, HMRC continues to encourage taxpayers who can submit and pay on time to do so.
Angela MacDonald, HMRC’s deputy chief executive, said: ‘We know the pressures individuals and businesses are again facing this year, due to the impacts of Covid-19. Our decision to waive penalties for one month for self assessment taxpayers will give them extra time to meet their obligations without worrying about receiving a penalty.’
The decision has been welcomed by accountancy bodies who had recently called on HMRC to remove the penalties and push back the January deadline like they did last year.
Adam Harper, director of professional standards and policy, AAT, said: ‘Today’s decision will give valuable breathing room to many taxpayers and help them to avoid potentially damaging fines at a critical time – not only for them as individuals, but for the UK economy as a whole.’
The Association of Accounting Technicians (AAT) has also stated that Covid-related staff shortages were making it ‘impossible for firms to process the documents on behalf of their clients in time’ and called on HMRC to extend the January deadline. The AAT added that that this measure will ‘help reduce the stress due to Covid-19-related absences’.
The freelancer trade body IPSE agreed with the AAT on accountancy absences stating that thousands of freelancers could be ‘unfairly punished’ for accountancy staff being ill with Omicron, particularly as the self employed sector is ‘still in a fragile state’ and more support is needed.
Andrew Chamberlain, director of policy, IPSE said: ‘We welcome today’s measure, however, it doesn’t help solve the long-term issues, confusion around IR35, the pandemic, inflation, etc, that continue to damage the financial wellbeing of freelancers.’
Commenting on the decision, Nimesh Shah, CEO at Blick Rothenberg said: ‘HMRC may be more concerned by the number of returns which remain unfiled, and the pressure to extend the timeframe as the deadline became closer.
‘HMRC are also likely to be very nervous about dealing with subsequent appeals against late filing penalties citing coronavirus, and therefore decided to take a pre-emptive decision now.
‘Given the public and government sentiment towards coronavirus, such appeals were expected to be waived through and HMRC have simply decided to extend the deadline by a month than go through the motions with appeals later. It suits HMRC not to have to the spend the time and cost in managing the appeals process later.’
The Chartered Institute of Taxation (CIOT) believes that HMRC should not just stop there and be open to introducing more support.
John Cullinane, director of public policy, CIOT said: ‘We would like the situation to remain under constant review. For example, it may be appropriate to introduce further easements similar to last year, such as extending the time limits for appealing any penalties which are levied and allowing tax advisers to make ‘bulk’ appeals on behalf of their clients.’
Source: http://www.accountancydaily.co/hmrc-defers-late-self-assessment-fines-end-february
]]>Scrapping the rise will reduce tax for 920,000 businesses by nearly £10,000 on average next year as they will no longer pay a higher level of employer National Insurance and can now invest the money as they choose, Chancellor Kwasi Kwarteng said.
With plans for a fiscal statement announcement on Friday 23 September, the Treasury has confuirmed that the national insurance cut will go ahead, effectively abolishing the Health and Social Care Levy introduced by former Chancellor Rishi Sunak.
The NI cut will help almost 28 million people across the UK, worth an extra £330 on average in 2023-24, with an additional saving of around £135 on average this year due to the increase in the national insurance threshold which came into effect in July and is not being reversed.
The Health and Social Care Levy (Repeal) Bill, legislating for the tax change, has been introduced into the House today.
As part of the cancellation of the Levy, The Chancellor is also set to confirm that the increases to dividend tax rates will be scrapped from April 2023 in his growth plan tomorrow. Those who pay tax on dividends will save an average of £345 next year. The increased dividend tax was introduced in April 2022 to ensure those who gained income from dividends contributed the same amount to help fund health and social care.
The levy was expected to raise around £13bn a year to fund health and social care. The Chancellor confirmed that the funding for health and social care services will be maintained at the same level as if the levy was in place, protecting the NHS through the winter and ensuring long-term investment in social care.
Kwarteng said: ‘Taxing our way to prosperity has never worked. To raise living standards for all, we need to be unapologetic about growing our economy.
‘Cutting tax is crucial to this – and whether businesses reinvest freed-up cash into new machinery, lower prices on shop floors or increased staff wages, the reversal of the levy will help them grow, whilst also allowing the British public to keep more of what they earn.’
The Treasury said that 920,000 businesses will see a cut in National Insurance bills, with 20,000 taken out of paying National Insurance entirely due to the employment allowance, which rose in April 2022 from £4,000 to £5,000.
In particular, many small and medium businesses (SMEs), which employ over 13m people in the UK, will see a cut to their National Insurance bills. Next year this will be worth £4,200 on average for small businesses and £21,700 for medium sized firms. In total 905,000 micro, small and medium businesses will benefit from 2023-24.
The Chancellor is committed to reducing debt-to-GDP ratio over the medium term and boosting growth, which will help fund public services.
Source: https://www.accountancydaily.co/125-cut-national-insurance-confirmed-employees-and-employers
]]>This year’s #TickTheBox campaign will focus on the value of Gift Aid and charities will be invited to share across their social media, website and newsletters the impact that Gift Aid has on the people and communities they serve.
Gift Aid is an incredibly important source of additional income and something charities need to always remind their donors how it can boost their donations.
The Charities Aid Foundation (CAF) published research earlier this year that warned that charities are missing out on hundreds of millions of pounds because 23% of eligible donors do not use Gift Aid.
The CAF research found that some 68% of full-time workers say they use Gift Aid when donating to charity, which is worth £1.3bn to the charity sector. However, according to the Charity Finance Group more than £500m is unclaimed.
This highlights just how important it is for charities to remind tax paying individuals to use Gift Aid when making a donation. Charities can reclaim the basic rate income tax the individual has paid on the donation, as long as the individual provides the charity with a Gift Aid declaration.
Changes to the basic rate of tax and the impact on Gift Aid
Currently Gift Aid increases the value of the donation by 25%, based on the basic rate of income tax being 20%. The Chancellor announced in September 2022 that the government intends to reduce the basic rate of tax to 19% from April 2023, which will result a reduction in the Gift Aid claimable.
In order to help charities adjust to this reduction, the government has agreed that for donations made until March 2027 an additional transitional relief on Gift Aid will be paid in order to match the current rate of 25%.
This is expected to be run in a similar manner to the previous transitional relief scheme that applied from 2008 to 2011, with the relief being automatically calculated and paid by HMRC. However, for donations from April 2027 onwards this relief will no longer apply and the Gift Aid claimed will reduce to 23.45%.
Complying with Gift Aid
Our Made Simple guide to Gift Aid points out the rules to follow and explains how charities can minimise the risks of errors being found during inspections. Charities claiming Gift Aid are subject to inspection by HMRC to ensure compliance.
The Gift Aid Small Donations Scheme (GASDS) was introduced on 6 April 2013 and allows charities to claim a Gift Aid like top up payment from HMRC on small donations made in cash or by contactless card payment of up to £30.
GASDS has fewer requirements, for example there is no requirement for a Gift Aid declaration and the donor does not have to have paid sufficient UK tax. However, the amount payable under GASDS is capped and the scheme is subject to its own set of rules and requirements which charity finance professionals must understand.
Certain concessions introduced during the pandemic in relation to ticket and loan refunds have now been made permanent. Many charities had to cancel events as a result of the pandemic and the government has agreed to allow individuals to donate any waived refunds of ticket purchases or loans to the charity under Gift Aid without the charity first having to pay the refund or loan to the individual.
About the author
Ross Palmer is a senior tax manager at Sayer Vincent
Source: https://www.accountancydaily.co/importance-using-gift-aid-tax-free-charitable-donations
]]>This will raise £18bn for the Exchequer and will see corporation tax for larger businesses increasing from 19% to 25%.
Truss said: ‘Parts of our mini Budget went faster than markets were expecting. We need to act now to assure markets of our fiscal discipline – we have decided to keep corporation tax rise and this will raise £18bn a year.’
However, this still leaves an estimated £25bn in unfunded tax cuts.
She added: ‘We will control the size of the state to ensure taxpayers’ money is always well spent. Spending will grow less rapidly than originally planned.
Today I have asked Jeremy Hunt to become the new Chancellor – he shares my convictions for this country.
‘I’m absolutely determined to see through what I promised – to see us through the storm we face.’
On the sacking of Chancellor Kwasi Kwarteng Truss said: ‘It was right in the face of the issues that we had that I acted decisively as that is vitally important to people and businesses across the country.’
Truss was key to the policies set out in the mini Budget and shaping economic policy, which were a critical part of her leadership challenge for the Conservative party over the summer. She has now sacked the Chancellor and says the growth plan will not be achievable as originally set out.
‘My priority is that we deliver the economic stability that this country deserves. We do need to raise our economic growth levels, and we are delivering on the energy price guarantee. I have to act in the interests of the country.’
‘I have made sure that we have economic stability in this country. Jeremy Hunt shares my desire for a high growth economy. We have to deliver the mission in a different way – achieving that stability in a very difficult global world.
‘We need to have a high growth economy but we have to recognise that we are facing a difficult time as a country – we need to focus on long-term sustainable growth.’
Source: https://www.accountancydaily.co/pm-u-turns-corporation-tax-hike
]]>An overwhelming majority (79%) of SMEs and tax agents believe that the move to Making Tax Digital (MTD) for Income Tax will increase the time spent and costs incurred in keeping records. Over half (58%) stated that this increase will be significant, according to the latest survey into HMRC by the Administrative Burden Advisory Board (ABAB).
Only 4% of respondents felt that the change would reduce costs or time.
However, there were high levels of awareness about the upcoming changes with 80% of respondents knowledgeable or somewhat aware about the new rules.
Currently HMRC plans to introduce MTD for Income Tax from April 2024 for self employed and landlords with income over £10,000.
There were also calls for HMRC to produce guidance well in advance of introduction of the new rules, with many wanting full details at least two years before the scheme goes live, while 43% they wanted to be fully informed of the process a year before launch.
ABAB said: ‘Most businesses are aware of this change to some extent, although more publicity is needed to engage the widest audience. As the time impact on these businesses is expected to be significant, HMRC helplines may need to be ready for greater demand, which may reduce the risk of significant levels of initial non-compliance.’
Once again the quality of HMRC’s telephone helplines were criticised by respondents with 38% stating that the services were ‘poor’. Only 7% said that their experience of engaging with HMRC during the last 12 months had improved, while 46% that the quality of their interactions with HMRC had worsened over the same time.
When asked if the legislative burden regarding tax compliance had changed over the last 12 months, 59% stated that this had worsened, 39% stated it had not changed and only 3% said that the burden had improved. In general, 58% of respondents stated that in the last 12 months they felt they had been impacted by legislative changes regarding tax compliance.
‘Businesses are not feeling any let-up in the increase in regulatory burden, with a large minority feeling that the customer experience had worsened over the last year (despite the positive feel around covid response),’ the ABAB report said.
‘This year-on-year trend is worrying as the effects are cumulative and look to increase with the extension of MTD. We will continue to work with HMRC to influence change where possible.’
In terms of advice, a third of SMEs said they turned to their accountants and tax advisers for help while 48% of respondents used HMRC’s website to source information.
The research also focused on the impact of the covid-19 support schemes and their ease of use. While there was general satisfaction with the application process for the various measures, 40% of respondents said that HMRC’s service was ‘poor’ when dealing with amendments or changes to submissions, particularly relating to the Coronavirus Job Support Scheme. Only one in four described HMRC’s approach as good or excellent.
In terms of the quality of HMRC’s covid-19 guidance, 59% thought it was useful and timely.
‘HMRC handled the information and online processes around Covid well,’ ABAB noted. ‘Those who could deal with it online were very satisfied, but those who had difficulty and needed to contact HMRC, felt poorly served.’
The survey also considered the quality of forms and the administrative burden with calls for more standardisation of forms, a function to all forms to be saved when partially complete and the language should be clearer. Respondents also said that all forms should be available online (and processed online) without the need to be printed off and posted in.
‘Overall, this is not unexpected. It shows where work may need to be concentrated earliest to minimise the increasing burdens expressed in earlier answers,’ ABAB said.
Source: https://www.accountancydaily.co/mtd-extension-will-raise-costs-smes-says-abab
]]>In a bid to curb inflation, this was the highest rate increase since 1989.
The Monetary Policy Committee’s (MPC) latest projections described ‘a very challenging outlook for the UK economy’ and said that the UK was in recession, which was expected to last for a prolonged period and CPI inflation would remain elevated at over 10% in the near term.
The Bank warned that GDP is expected to decline by around 0.75% during 2022 H2, in part reflecting the squeeze on real incomes from higher global energy and tradable goods prices, the Bank of England said.
The fall in activity around the end of this year is expected to be less marked than in August, however, reflecting support from the energy price guarantee (EPG). The labour market remains tight, although there are signs that labour demand has begun to ease.
CPI inflation was 10.1% in September and is projected to pick up to around 11% in 2022 Q4, lower than was expected in August, reflecting the impact of the EPG. Services CPI inflation has risen. Nominal annual private sector regular pay growth rose to 6.2% in the three months to August, 0.6 percentage points higher than expected in the August report.
CPI inflation is projected to fall sharply to some way below the 2% target in two years’ time, and further below the target in three years’ time.
Glenn Collins, head of ACCA UK said: ‘Undoubtedly this eighth interest rate rise will further exacerbate the challenges for the UK’s SME community.
‘Accessing finance is hard and is taking longer to access. It is vital to put finance in place well before it’s needed. SMEs across the UK need stability and as much certainty from the Exchequer as it can provide to allow them to effectively plan, recover and grow.’
The negative outlook and threats that the recession could last up to two years led to another fall in the dollar.
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, said: ‘It’s proved to be yet another dismal day for the pound as forecasts of a long recession cast a dark shadow over the UK economy.
‘Sterling dropped by 1.9%, to just $1.116, its lowest level for two weeks, before recovering slightly. Investors have been assessing the bleaker outlook for Britain amid forecasts unemployment could shoot up to just shy of 6.5% by 2025.’
Alpesh Paleja, CBI lead economist, said: ‘The Bank has deployed a bumper rate rise, underscoring the scale of the UK’s inflation challenge. A weakening economy and tighter fiscal policy is set against volatility in global energy prices, stubbornly high inflation expectations and persistent wage pressures.
‘With monetary policy focused on tackling inflation, the government’s immediate priority should be to reinforce markets’ faith in the UK’s hard-won reputation for stability – but fiscal sustainability and growth shouldn’t be an either or choice.
‘The Autumn Statement must learn the lessons of the 2010s: fiscal sustainability and lifting trend growth are both priorities. Alongside protecting the most vulnerable, the government should safeguard capital spending and investment allowances to enable private sector investment to drive future growth.’
Source: https://www.accountancydaily.co/interest-rate-hiked-3
]]>Using salary sacrifice schemes can benefit staff and reduce tax liability on company cars, explains James Fields-Davis, head of fleet development at Volkswagen Financial Services Fleet (VWFS Fleet)
As it is for many businesses, finding and keeping talent is proving a challenge for the accountancy sector at the moment. Accountancy is facing a critical skills shortage, recent research by Broadbean Technology found that candidates in the sector dropped a third (33%) between May and June 2022.
In today’s job seeker market, it is becoming crucial that businesses offer competitive employee benefits packages to attract talent into their business and retain their skilled workers.
Securing new talent is set to get even harder, with the latest statistics showing the UK employment level at a 40-year high. While many accountancy firms have turned to salary reviews to hold onto staff, people are increasingly looking beyond just the salary when deciding on a new role; the benefits package can make the difference between someone accepting the job or not.
A cost-effective benefit that businesses should consider is a salary sacrifice car scheme, a highly attractive financial benefit that can ease the pressure for many workers. The cost of living crisis is putting additional financial strain on many people, making everyday bills, such as car payments, a potential source of anxiety.
Salary sacrifice gives individuals the opportunity to ‘sacrifice’ a portion of their salary, pre-National Insurance and income tax, to put towards a brand new vehicle of their choice, making it a cost-effective way of financing a car they may not have otherwise had the budget for.
In addition to helping employees finance vehicles, salary sacrifice is an excellent way to offer electric vehicles or ultra-low-emission vehicles (ULEVs) to those who may not qualify for a company car.
Offering electric vehicles can help businesses move to a low-carbon future – an issue that increasingly matters when attracting and retaining top talent as 65% of UK office workers would be more likely to work for a company with robust environmental policies.
There are significant financial benefits to be gained for both employers and employees following the introduction of a salary sacrifice scheme that includes electric vehicles (EVs).
The benefit-in-kind (BIK) tax obligation for EVs is just 2%, and it will stay at this level until April 2025. It is a powerful incentive for employees to switch to electric cars as opposed to staying with petrol or diesel vehicles, where the BIK rate could exceed 30%.
And it is not just employees that can financially benefit. Offering electric vehicles through a salary sacrifice scheme also offers substantial Class 1A National Insurance (NI) savings for employers.
Businesses can typically save around £80 to £100 per employee per month for each zero-emission vehicle on the scheme. Employees also see lower NI contributions – a highly attractive option considering the current cost of living crisis that is squeezing most incomes.
At a time when businesses need to offer competitive benefits to stand out in the recruitment market while potentially battling rising costs themselves, salary sacrifice doesn’t cost anything to offer, so is a way of keeping up with the talent market without increasing overheads.
By encouraging the adoption of electric vehicles among staff, companies can also offset their carbon emissions, and this is critical as sustainability strategies become increasingly important for all responsible businesses.
Organisations are looking to implement clear, deliverable plans that enable them to transition to a net-zero future. Company car fleets and even the ‘grey fleet’ – where employees use their personal car to commute or for business purposes – are large contributors to emission levels and, as such, collective action needs to be taken.
Luckily for businesses, they are also one of the easiest things to change in order to reduce overall company emissions. Offering EVs via a salary sacrifice scheme to employees who may not qualify for a company car – but who are creating emissions by driving to the workplace – can be a quick win for businesses looking to address their carbon footprint and tackle climate change.
As well as personal tax benefits, employees selecting an EV will also find their running costs are significantly less, particularly if they can charge up at home overnight or at work if the business has installed EV charging points. With the cost of filling a family car with fuel now exceeding £100, it is clear to see the transport running cost advantages that an EV delivers.
For companies wishing to investigate how they can add salary sacrifice schemes to their list of employee benefits, VWFS Fleet runs salary sacrifice roadshows. They highlight the many tangible benefits to staff and organisations and showcase innovative online tools such as ‘EV-4-Me?’ that help advise employees on whether an electric vehicle fits their journey needs.
Salary sacrifice can revolutionise your benefits package and attract desperately needed talent through a financial incentive outside of salary when recruiting while also improving the company’s carbon footprint and reducing costs.
Source: https://www.accountancydaily.co/how-salary-sacrifice-schemes-cars-work
The government’s deep freeze on income tax thresholds will see some workers’ tax bills rise by the equivalent of a 3.5% hike in the headline rate of tax
Someone on a salary of £50,000 will pay just under £59,000 in income tax over the six years of the threshold freeze.
The total tax bill will be more than £9,000 higher than it would have been if tax thresholds had been uprated with inflation during that time, illustrating the damaging effect of fiscal drag on earnings.
Analysis by AJ Bell showed that the basic rate of income tax would have to have risen by 3.5% to 23.5% to raise the same amount of tax from a £50,000 earner.
The stealth tax rise does not only hit higher earners, as the average £33,000 earner will also see an equivalent 2% increase to a base rate of 22%.
The tax hike for middle-earners is particularly acute because they are vulnerable to the fiscal drag effect pulling them into a higher tax band, AJ Bell warned.
Meanwhile, a higher earner with £75,000 of earnings will be hit by the equivalent of both the basic rate and higher rates of tax increasing by three percentage points each, to 23% and 43% respectively. That would see them pay the same £126,000 income tax bill they face over the six years of frozen tax thresholds.
The figures illustrate the full extent of rising income tax bills for ordinary workers, despite the government’s sleight of hand designed to avoid raising headline level rates of income tax.
Laura Suter, head of personal finance at AJ Bell, said: ‘These figures lay bare just how much the decision to freeze tax allowances will cost taxpayers over the six years of the freeze.
‘They also highlight the sneaky tactics employed by the government to nab more money from our pay packets without many taxpayers realising.
‘Imagine the uproar and headlines if the government had increased the basic rate of tax from 20% up to 23.5%. Not least because it would break a manifesto commitment. But, more importantly for voters, it would be much easier for them to understand the scale of the huge hike in their tax bill in the next few years.
‘Most taxpayers don’t understand how ‘fiscal drag’ works or the real impact of the frozen allowances, and the government is definitely banking on that fact.
‘What’s more, unless the government hikes tax thresholds by huge amounts in 2028 (or overhauls the income tax system), it’s a fiscal drag that we’ll take forward for the rest of our working lives – those lost six years can never be reclaimed.
‘Each taxpayer is impacted differently depending on their pay, so the equivalent tax rate increase varies across income levels. But once again the ‘squeezed middle’ are hit hardest, with the impact of the frozen allowances meaning those with salaries near the current higher rate threshold are squeezed on both sides, getting less of their income tax free and seeing more of their income pushed into the higher rate band.
‘The result is the same as if thresholds were instead uprated to keep them out of the higher rate tax band, but the basic rate were increased to a whopping 23.5%.’
Source: https://www.accountancydaily.co/threshold-freeze-equivalent-35-tax-hike