The Office for Budget Responsibility (OBR) has recently issued a warning that 8.3 million people in the UK will be paying more tax by the year 2029-30. This is due to the government’s decision to freeze tax thresholds, which will result in fiscal drag and increase the country’s overall tax burden to its highest level since World War II.

The OBR’s report, titled “Fiscal drag to push 8.3 million more Britons into higher tax brackets by 2030,” highlights the impact of the government’s decision to freeze tax thresholds until 2026. This means that while people’s salaries may increase with inflation, they will still be paying a higher amount of tax, as their income will fall into higher tax brackets.

According to the OBR, this will result in 8.3 million people paying an average of £1,040 more in tax by 2029-30. This is a significant increase and will affect a large number of people in the country. The report also states that this will push the UK’s overall tax burden to its highest level since World War II.

The term “fiscal drag” may sound complex, but it simply refers to the government’s practice of not adjusting tax thresholds in line with inflation. This means that as people’s salaries increase, they will be pushed into higher tax brackets, resulting in a higher tax burden. It is a silent but effective way for the government to collect more tax revenue without raising tax rates.

One of the main reasons for the government’s decision to freeze tax thresholds is to cover the costs of the COVID-19 pandemic. The pandemic has had a significant impact on the country’s economy, and the government needs to find ways to generate revenue to cover the expenses incurred.

However, this decision will have a severe impact on the average person’s finances. With inflation on the rise and people’s salaries not keeping up with the increasing cost of living, paying more tax will put a strain on their budgets. This is particularly concerning for low and middle-income earners who are already struggling to make ends meet.

Moreover, this decision goes against the government’s promise to lower taxes for the average person. It is a far cry from their pledge to raise the income tax threshold to £12,500 and the higher rate threshold to £50,000 by 2023. Instead, the freeze on tax thresholds will push more people into higher tax brackets, resulting in a heavier burden on their shoulders.

The OBR’s report also highlights the fact that this decision will have a disproportionate impact on women. As women’s salaries tend to be lower than men’s, they will be pushed into higher tax brackets sooner, resulting in a higher tax burden for them.

The OBR’s warning is a wake-up call for the government to re-evaluate its decision to freeze tax thresholds. While it may seem like an easy way to generate revenue, it will have a significant impact on the average person’s finances and the overall economy.

It is essential for the government to find alternative ways to cover the costs of the pandemic without burdening the average person with higher taxes. One way to do this could be by targeting wealthy individuals and corporations who have been able to thrive during the pandemic.

In conclusion, the OBR’s report serves as a warning that the government’s decision to freeze tax thresholds will have a significant impact on the country’s tax burden. It is crucial for the government to reconsider this decision and find alternative ways to generate revenue. As a nation, we must work together to ensure that the burden of the pandemic is not placed on the shoulders of the average person.