Tom Selby, director of public policy at AJ Bell, said: “The fact the Chancellor is even contemplating breaking a key manifesto pledge on income tax rates shows just how precarious the economic situation is at the moment.
“An increase in the income tax rate by 1p across the board would increase the financial pain many are already feeling as a result of the deep freeze on allowances, which has already forced millions into paying more income tax as their wages rise.
“For someone earning £35,000 a year, roughly the average income of a UK adult, an extra 1p on income tax would see their annual bill rise from £4,486 to £4,710 – an increase well in excess of £200.
“If this were to happen, there will be an extra incentive for those affected to contribute to a pension, as the tax relief available will increase by one percentage point.
“For a basic rate taxpayer, this would mean getting £100 in a pension would only cost £79, with £21 added through tax relief, compared to £80 today.”
Contact details are available to account holders.
Create a free account to get in touch with this expert.