Middle-income families will be worse off by thousands of pounds over the next six years, according to newly published analysis of the Government’s autumn statement.
The Institute for Fiscal Studies (IFS) said the drop in living standards will “hit everyone” but “Middle England is set for a shock”.
“The truth is we just got a lot poorer,” the economic think tank’s director Paul Johnson said and he predicted “higher taxes and a bigger state” are likely to stay for the “next several decades”.
He listed the self-inflicted wounds to growth as including Brexit, austerity-era cuts to education spending and Liz Truss’s disastrous mini-budget, which he described as a “large own goal”, as well as the general political chaos of recent months.
The income tax hikes are likely to produce a rebellion on the right of the Conservative Party with one MP, David Jones, already asking the government to “urgently reassess” the measures and suggesting the stealth taxes were dishonest.
The IFS said freezing income tax thresholds until 2028 would mean a record 8 million people would pay the 40 per cent rate.
The decision to lower the threshold for those paying the highest 45 per cent rate from £150,000 to £125,000 will push an extra 350,000 people into the top band, raising £1 billion for the government.
Tax payers also face higher energy bills and inflation eating into their wages.
The changes mean a record number of about 2 million people will be paying the highest income tax at 45 per cent by 2027-28.
The average household is predicted to pay an extra £900 in energy and electricity bills this year, with a quarter of households paying more than an extra £1,000.
The government’s decision to allow local authorities to raise council tax will also add to the burden on households.