Should we stop dragging people into tax designed for the rich?

This is Money Podcast

This is Money

Business News, Business, Investing, News

4.1 • 650 Ratings

🗓️ 19 May 2023

⏱️ 52 minutes

🔗️ Recording | iTunes | RSS

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Summary

Almost five times as many people will soon be paying 40 per cent tax than in the early 1990s, when it was seen as a tax bracket reserved for the rich, the Institute for Fiscal Studies warned this week.

It said that fiscal drag triggered by freezing the higher rate tax threshold would pull 7.8million people into its net by 2027.

The study suggested that the threshold would have to be almost doubled from its current level, at £50,271, to almost £100,000 to return the tax band to the level intended for it.

Alongside the report, came the IFS’s warning that 40 per cent tax had stopped being the preserve of high-earning professionals and was now hitting electricians, plumbers, teachers, nurses and more.

The taxman nabbing 40p of every pound earned from a pay rise rather than 20p comes at a time when workers are running to stand still, with inflation at just above 10 per cent.

So, is it time the government stopped taxing by stealth and using tools like fiscal drag – instead raising thresholds with inflation or wages?

And is it time to hike the higher rate threshold and pull people back down to basic rate tax?

On this podcast, Georgie Frost, Lee Boyce and Simon Lambert discuss the thorny issue of tax and who counts as wealthy.

The debate moves on to inheritance tax – another levy designed for the very rich but now hitting the wealthy middle classes. Why is IHT so unpopular when most don’t pay it and does it need reform?

Plus, how much have you lost to inflation, will you get Nationwide’s new £100 Fairer Share bung, and finally, would you buy food two years past its best before date for big savings?

Transcript

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0:00.0	Welcome to This Is Money podcast. I'm Georgie Frost and joining me and Simon Labber today is Lee Boyce.
0:08.2	And coming up, income tax, dividend tax, capital gains tax, inheritance tax, thresholds all been cut or frozen.
0:14.7	But is it time to cut the tax burden and stop dragging ordinary folk into taxes designed for the rich. Simon has his views.
0:23.5	Also today, how much have you actually lost to inflation? We do the math so you don't have to
0:29.0	and probably wouldn't want to after you see the results. And would you buy food? Two years
0:35.1	pass its best before date to save money.
0:42.6	We take it for the team and put two new apps to the test again so you don't have to.
0:45.3	Don't forget you to update with all the latest breaking money news.
0:49.2	Just go to this ismoney.co.uk or download the app.
0:49.9	Don't forget.
0:58.2	You can stay on top of what's going on in the markets by tuning in to the Digest and Invest Podcast by Itara. Go to your regular podcast platform and listen on the go. Digest and invest by Itora, the podcast for those interested in trading and investing. But first, every
1:03.3	politician likes to say they're on the side of working Brits. But due to the biggest stealth raids
1:08.7	in decades by the government, thousands more nurses,
1:12.6	teachers, police officers, all set to lose more of what they earn to tax.
1:17.6	A report out this week warns that one in five taxpayers will pay the 40p higher rate by
1:22.6	2027 as a result of the controversial freeze on tax thresholds.
1:26.6	That's almost five times the figure in the early 90s.
1:31.3	Now, it's not just income tax, but as I said earlier, a host of others,
1:34.3	once seen as reserve for the rich that are hitting ordinary folk.
1:38.3	So what to do?
1:40.3	Simon Lee, welcome firstly, Simon, Economics 101, if you would. Fiscal drag. Fiscal drag doesn't
1:48.1	sound amazing, does it? And it isn't. It is, in fact, something of a drag. There you go.
	...

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