But chancellor affirms pledge not to hike income tax, national insurance or VAT.
Taxpayers have been dealt a blow today, as the amount they can earn before paying tax will be frozen until 2026.
Fears had been mounting that chancellor Rishi Sunak could use today’s Budget to unveil extra tax measures to help repay the country’s £284 billion bill for Covid-19 support.
Speaking in the House of Commons today, Sunak said personal tax thresholds would be frozen until 2026.
The basic allowance, currently £12,500, will go up to £12,570 in the next tax year, as previously announced, and the higher-rate threshold from £50,001 to £50,270.
Thresholds for inheritance tax and capital gains tax will also not change, Sunak said.
The chancellor also took aim at retirees by freezing the lifetime allowance, the amount pensioners can withdraw before paying tax, until the end of this Parliament.
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This is currently £1,073,100, and will not rise in line with inflation as originally planned.
Becky O’Connor, head of pensions and savings at interactive investor, said: “Freezing allowances is a backhanded way of raising taxes, as wage inflation and asset price inflation increase the number of people pushed over the thresholds at which they have to pay more tax.
“The chancellor has avoided overtly named wealth taxes by making these changes to existing allowances, which will result in higher tax bills for an increasing number of people who build up assets – whether that’s in pensions or property values, in the next five years."
Sunak said that the UK’s borrowing is still the highest ever outside of wartime, and that freezing the tax thresholds was only the “first step”.
But he confirmed the Conservative’s 2019 election pledge not to raise the rates of income tax, national insurance or VAT.
Sunak added: “What was originally thought to be a temporary disruption to our way of life has fundamentally altered it. Despite this unprecedented response the damage coronavirus has done to our economy has been acute.”
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