The Liberal Democrats say the Conservatives’ Autumn Statement had some “small print” surprises which will cost savers dearly. However, new reports say Conservatives could be making even more changes to the personal tax thresholds come the Spring Budget
By holding down tax-free limits on ISAs the the Liberal Democrats have stated that the government will have raided savers of £755 million between 2023 and 2029, according to measures in the small print of the Autumn Statement reveal
The Liberal Democrats have slammed the Autumn Statement’s latest “hidden horror” as an “act of deception” as it will continue the freeze on tax-free limits for ISAs which will have cost savers £755 million between 2023 and 2029.
The measures relate to Individual Savings Accounts (ISAs). New schemes in the Autumn Statement could equate to an additional £55 million for those with an ISA over the next five years, but the government will “take away far more” by continuing the freeze on tax-free limits for ISAs, the Lib Dems have stated.
“Conservative Chancellors have frozen ISA limits every year since the start of this Parliament, hitting savers as inflation rises. This will deny savers an additional £755 million between 2023 and 2029,” the Lib Dems reported in a statement.
They say nearly half of this “tax raid” is a result of the Autumn Statement, with the Chancellor’s decision to freeze thresholds for 2024-25 giving the Exchequer an extra £305 million in the years running up to 2029 if they remain frozen.
The tax raid in the Lib Dem’s estimations “dwarfs” the £55m for savers announced by the Chancellor.
“The Liberal Democrats have called this “another act of deception” after the Chancellor claimed that his Autumn Statement would result in tax cuts when the overall tax burden will actually increase. It equates to a hat-trick of stealth taxes, with thresholds for income tax and NICs also remaining frozen.”
Liberal Democrat Treasury spokesperson, Sarah Olney MP said:
“This is yet another act of deception from an Autumn Statement that was packed full of tax rises and raids on people’s wallets.
“The Statement was all about taking money out of people’s pockets to pay for this Conservative government’s crashing of the economy.
“Their mismanagement of the public finances is now having real consequences for those trying to get on the housing ladder and fulfil their dream of owning a home.
“This Conservative government has denied them of that opportunity and it adds insult to injury for working people that Ministers cannot be honest about it.”
Analysis of the stealth tax on ISAs
ISAs have been frozen every year since the beginning of the Parliament. The measures began to raise revenue for the Treasury this year (2023-24) and will be raising at least £130m a year by 2028-29, the Lib Dems have reported. In the years running from 2023 to 2029, they will have raised at least £755 million for the Treasury.
The government announced a number of measures for savers (“ISA” – Individual Savings Account). These measures could cost the Govt £55m over the next five years.
Analysis of income tax and NI cuts
The freeze on personal tax thresholds, which was implemented to cover pandemic-related expenses, is scheduled to continue until 2028, as reported by The Mail on Sunday. However, Conservative sources have hinted that it could be lifted in the Spring Budget or become an election promise for next year.
Until that decision is made, the following analysis shows the impact of threshold freezes.
Box 3.1 on pages 69-71 of the OBR Economic and Fiscal Outlook shows that:
- By 2028-29, 7.4m people will pay a higher rate of income tax because of the threshold freezes:
- 4m people could be brought into paying income tax
- 0.4m people could be brought into paying the 45p rate
- 3m people could enter the 40p tax bracket
- The total additional government revenue from the income tax and national insurance threshold freezes over 6 years (2023-24 to 2028-29) will be £201bn.
- The £201bn stealth tax raid is four times as much as the £50.5bn of tax giveaways over the next 6 years from the three changes to NICs (Source: Table 5.1)