Burnham's Tax Devolvement Hint
Andy Burnham has indicated a potential HMRC income tax move that could see those earning £35,000 left up to £500 worse off by the end of the decade. The Labour Party government has already frozen income tax thresholds until 2031, a policy that acts as a stealth tax through 'fiscal drag' — when wages fail to keep pace with inflation, a larger proportion of earnings is absorbed by tax.
Fiscal Drag Impact
According to experts, the freezing of tax bands means that those earning £35,000 will be approximately £500 worse off by 2031. Nimesh Shah of Blick Rothenberg accounting firm described frozen allowances as 'one of the biggest tax raisers available,' noting that it effectively increases the basic rate of income tax by 4%.
Devolvement Considerations
Former Treasury Minister Lord O'Neill has stated that Burnham, the new Labour MP for Makerfield, is considering devolving 'aspects' of income tax across Britain. O'Neill, tipped to become chief economic adviser to the Prime Minister, said devolution is a key theme for Burnham and is being examined 'in a serious way.'
Expert Warnings on Stealth Taxes
Rathbones investment firm commented: 'Income tax rates are unlikely to rise, but changes to thresholds and allowances could still increase the amount you pay — even if the headline rate stays the same.' They added that frozen thresholds or adjusted allowances can increase tax bills over time. Burnham has acknowledged concerns about the frozen personal allowance and proposed a review, which could reduce the effects of fiscal drag.
However, Lord O'Neill warned against relying on stealth taxes, stating: 'We can't just keep avoiding what are seen as difficult choices, and having back-door ways of raising tax.' Nimesh Shah added that the future PM will need 'quick wins' within the current tax system to raise cash, but cautioned that such measures may not be sustainable.
