Tax hiked and growth downgraded as details of Budget released early

Andrew Prosser, head of investments at InvestEngine, said: “Rachel Reeves has confirmed frozen income tax thresholds will now extend to 2031.

“This isn’t just a technical tweak, it’s a stealth tax.

“By 2031, well over a million people will pay income tax, with higher-rate taxpayers creeping up to more than 10 million.

“If you’re near the £50,270 threshold, just a couple of decent pay rises could push you from 20 per cent to 40 per cent tax, while for higher earners, this policy could see half a million more people fall into the £100,000 tax trap, where every extra £2 earned costs £1 of your personal allowance, effectively a 60 per cent tax rate.

“To help manage the impact, investors can make the most of ISA allowances – which is still £20,000 overall despite the Cash ISA cut – to shield money from income and capital gains tax, and consider increasing pension contributions to take advantage of tax relief at their highest marginal rate.

“For higher-rate taxpayers, a £20,000 contribution can effectively cost just £12,000 once government and personal tax relief are applied, making careful planning more important than ever.”