The Chancellor of the Exchequer Rishi Sunak revealed thresholds for Inheritance Tax (IHT), the pensions lifetime allowance and Capital Gains Tax will be frozen at their current rates. This freezing has however caused outrage for many who label the move as a means to implement a “stealth tax”, but the Chancellor claims the move will leave “nobody” will less take home pay.
Rishi Sunak unveiled a number of new financial measures designed to help rebuild the British economy following the coronavirus pandemic.
The key announcements include extending the Stamp Duty holiday until the end of June, the extension of the £20-a-week uplift in Universal Credit payments for six months and the freezing of several tax rates until 2026.
However, some experts have accused the Chancellor of using these frozen rates to implement a stealth tax.
Journalist Robert Peston tweeted: “Pretty much all tax thresholds – for income tax, inheritance tax, pensions allowance, CGT, VAT and so on – will be frozen from next year to 2026.
“These are disguised tax rises for pretty much all of us, though hit higher earners most”.
However, many people took to social media to criticise these tax freezes, commenting the move makes IHT and other taxes stealth tax rises.
On Twitter, one person wrote: “Pretty much all tax thresholds – income tax, inheritance tax, pensions allowance, CGT, VAT will be frozen from next year to 2026. These are stealth tax rises on all of us. #Budget2021”.
Another person added: “#Budget2021 news: stealth income tax hikes over the next 5 years will make you worse off. But at least alcohol & fuel duty won’t rise for 1 year, which means on average for every 400 pints you buy the chancellor will let you have one free!”
One person wrote: “It’s a stealth tax rise and a less take home pay once inflation is taken into account. So in real terms take home pay will be less in future.”
Another added: “Rishi Sunak announcing no income or VAT tax rises but freezing the personal allowance threshold is a clever move. It’s called a Stealth Tax rise; whereby as people’s incomes go up and they pay higher taxes the income taxed on it will remain the same.”
One person tweeted: “Well, no CGT, IHT or Dividend Tax rate increases but remember, tax consultations to be rolled out in the next couple of weeks and rates might effectively increase by stealth, by reducing or removing reliefs and allowances say Grant Thornton #BudgetSpeech2021”.
Another person wrote: “#BudgetSpeech2021 freezing IHT and Pensions lifetime allowance – stealth tax measures there – freezing Tax thread holds for 5 yrs but not ruling out rate increases – no reference to #statepension and underwriting 95% mortgages – cue house price rises and mortgage failures”
But what does stealth tax actually mean?
Across the board, the four-year tax freeze is expected to raise an estimated £6bn for the Treasury.
The concept of stealth tax, a means that governments use of increasing revenue raised from the public in a partially clandestine way.
It is essentially a form of tax levied in such a way it is largely unnoticed or not recognised as a tax.