The freeze on income tax thresholds and changes to dividend and CGT allowances will see millions dragged into higher rates of taxation, but there are ways for higher earners to reduce their tax bill, explains Laura Suter, director of personal finance at AJ Bell
A consequence of frozen thresholds combined with rising wages means that the stealth tax increase will see many households pay thousands more in tax than they would have done had thresholds been indexed in line with inflation.
The Office of Budget Responsibility (OBR) estimates that by 2028-29 the deep freeze on tax thresholds will see around four million extra taxpayers while three million more will have moved to the 40% higher rate of income tax, and another 400,000 will pay the additional 45% rate.
For those who find their income tax bill rising thanks to frozen thresholds, here’s a checklist of actions to take:
Cancel marriage allowance (£12,570)
When you become a basic rate taxpayer you lose the ability to claim the marriage allowance. The marriage allowance is a tax break offered by the government to married couples or those in a civil partnership, and is worth up to £252 a year.
