However, Ms Reeves is currently weighing whether to extend the freeze by a further two years to plug a £40bn shortfall in the public finances.

The policy is known as fiscal drag because while it does not raise headline income tax rates, it drags workers into paying more tax as pay rises tip them into higher bands. The tax-free personal allowance does not rise in line with inflation each year.

Jeremy Cox, of Coventry Building Society, said: “A double whammy of fiscal drag and higher interest rates has led to a surge in the number of people paying tax on savings income and the amounts they’re having to cough up.

“Savers are typically earning higher interest rates on their savings pots than they were a few years ago. And, while tax-free cash Isas have surged in popularity, those with money in non-Isa savings are using up their personal savings allowances more quickly.”

Savers are not alone in being impacted by a continued freeze on tax thresholds, with a slate of middle income professionals, including police officers, accountants and civil engineers, expected to be dragged into the 40pc tax bracket as earnings steadily grow.



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