'Stealth tax' to cost London families extra £500 by 2026, new research shows

Households in London and the South East are expected to be around £500 a year worse off by 2026 as 1.2 million Britons are pulled into a higher tax rate, new analysis shows.

The House of Commons Library, which provides independent research to the Government, says an extra 155,000 low earners in the capital will pay income tax, while an additional 210,000 taxpayers will have to pay a higher rate.

Chancellor Rishi Sunak announced in March last year that the threshold at which people start paying income tax at 20% will increase from £12,500 to £12,570 in April this year and will then be frozen until 2026.

The 40% rate threshold for higher earners will increase by £270 to £50,270 in April and will remain at that rate for four years.

The measures are set to make the Government almost £10.9 billion in 2025-26 from households across the UK, excluding Scotland, the research says.

Sunak described the policy as "progressive and fair" to tackle rising debt, but the issue of high taxation amid rising inflation and energy bills has caused a major rift in the Tory party.

It comes alongside a 1.25 percentage point increase in National Insurance contributions that is expected to raise £12 billion that Prime Minister Boris Johnson says will be used for the NHS.

Brexit Minister Lord Frost resigned from the Cabinet last month, citing high taxation as one of his major concerns.

During Wednesday’s Cabinet meeting Jacob Rees-Mogg is understood to have told the Chancellor that the National Insurance hike should be scrapped to stem the cost-of-living crisis.

The Liberal Democrats, who commissioned the House of Commons research into the tax policy, described it as an "unfair stealth tax" on families worried about paying their bills this winter.

Calling on the prime minister to drop the policy, Treasury spokesperson Christine Jardine MP said: "People are worried about the rising cost of living and paying their bills this winter.

"Now they face years of tax rises under a Conservative government that is taking them for granted."

Speaking during a visit to a vaccination centre in Haywards Heath, West Sussex, on Thursday, Sunak told broadcasters the rise in National Insurance was the "responsible thing to do" to fund the NHS.