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Dragging people into higher rates of tax

Briefing note

This Saturday (6 April 2019) marks the start of a new tax year. Unlike many other countries, the UK routinely – and sensibly – uprates the cash values of most tax thresholds and benefit rates each year in line with inflation, in order to maintain their real value.

In a number of cases, however, this routine uprating has now been cancelled for extended periods:

  • The inheritance tax threshold has been fixed at £325,000 since 2009–10.
  • Fuel duties have not increased in cash terms since April 2010.
  • Most working-age benefits have been frozen in cash terms since 2015–16.
  • The VAT registration threshold has been frozen at £85,000 since April 2017, and the last Budget announced that it would remain frozen until April 2022.

Some of these policies raise revenue; others give money away. But in neither case is it sensible policymaking.

Find out more

Press release
By freezing the thresholds at which child benefit is withdrawn, the personal allowance is withdrawn and the top rate of income tax applies, recent governments have, rather stealthily, increased the tax rates on high earners and the number of people facing high marginal rates of tax.