UK families risk £800 yearly tax hike following election, says think-tank

A prominent think tank has warned that tax increases that are "hiding in plain sight" and will cost UK families an average of £800 a year are already on the way, no matter who wins the election.

The Resolution Foundation says the measures will raise taxes by about £23bn annually by 2028–29.

The Labour Party and Conservatives will debate the taxes they would implement if they were in control.

Neither party has promised to undo the changes made in the most recent budgets and fall statements.

These include freezing income tax and national insurance levels for another six years and undoing the temporary cuts to business rates, fuel duty, and stamp duty land tax next spring.

When tax rates stay the same, inflation and pay raises pull more people into the higher tax bracket. This is called fiscal drag, and it brings in more money for the Treasury.

The income tax rates have been frozen since 2022 and will likely stay that way until April 2028.

The Resolution Foundation discovered that the Treasury's tax revenue is currently at its highest level. It is due to an increase in taxes for higher earners and corporations.

One in ten people in 2010 paid a higher marginal rate of 40% or more. By 2023, that number will have risen to one in six, three million more people.

Some people in the middle class are better off, though, because their social insurance payments were cut this year.

This review comes just a few days after Rishi Sunak said in the first debate that Keir Starmer would raise taxes by £2,000 "for everyone."

The Labour leader called the claim "absolute garbage," and James Bowler, the permanent secretary for the Treasury, said that ministers had been told not to say that the number came from civil workers.

On Thursday, the UK's data watchdog told the Conservatives they were wrong about the claim.

The Office for Statistics Regulation worried that people who were listening would not be able to know that the £2,000 was not a change to the tax rate every year but rather a sum added up over four years.

The Chief Economist at the Resolution Foundation, Adam Corlett, noted that historically, tax increases tend to occur after general elections. Public services are clearly under significant strain, and this situation will worsen if political parties remain inflexible on tax adjustments.

The study found that the first two fiscal events after each of the last eight elections led to new tax policies that raised taxes by an average of £21bn a year.

In a separate study, the Institute for Fiscal Studies (IFS) said that changes to taxes and benefits have caused the wages of families with children to drop by an average of £2,200 a year since 2010.

According to the IFS, parents without jobs have lost the most money—£5,500 a year—while families with jobs have cut their benefits.

As a result of the changes, the amount of child tax credits has gone down, and the "two-child limit" means that most families can only get child tax credits and universal credits for their first two children. The IFS said the general benefit cap affected families with children the most.