Londoners hit hardest by new income tax stealth rise


  • Taxpayers in London will pay £500 extra a year in tax.

  • 155,000 more Londoners to start paying income tax following Government changes to thresholds.

The Conservative government’s new stealth tax raid will cost the average family in London a staggering £500 a year extra by 2026, research commissioned by the Liberal Democrats has revealed. The increase will be detrimental to many families in the capital with the lowest earners being hit most.

The new tax hike on households follows the Government refusing to update income tax thresholds in line with inflation, which usually takes place each year. This means even more people will earn above the lowest income tax threshold, as well as be forced to pay higher bands of tax. 

The new analysis by the House of Commons Library has found that the freeze will mean almost 155,000 more people in London on low pay will be paying income tax by 2026, while an additional 210,000 people will be in an even higher rate tax bracket than before. The research is based on modelling using the latest inflation forecasts from the Office of Budgetary Responsibility.

Figures show that the Londoners are set to be hardest hit by the stealth tax, with an average hit to incomes of £500 per household. This will lead to a total hit of £1.8 billion to taxpayers in London in 2026, with the South East’s total hit at £1.9 billion, more than anywhere else in the country.

Across all regions, household disposable incomes are set to be 1% lower in 2025/26 than they would be if there was no freeze to income tax thresholds, or £430 lower per household.

The Liberal Democrats are demanding that the Government drops the planned stealth tax to help families cope with rising energy bills and a worsening cost of living crisis. This would mean that the tax thresholds increase in line with inflation, reflecting the growing costs faced by households.

Lib Dem Spokesperson for Carshalton and Wallington Bobby Dean said:

“The Conservatives are making people pay more with an unfair stealth tax while the cost of living skyrockets. It’s another broken promise from Boris Johnson’s Conservatives, who are totally out of touch with local people’s struggles.

“They are taking people in Sutton for fools, but people here are sick of Boris Johnson’s lies. We need bold action to create a fairer system now."

Liberal Democrat Leader Ed Davey said:

“The Prime Minister must drop this unfair stealth tax that will hit families who are already feeling the squeeze.

“With the cost of living in London already skyrocketing, this is the last thing households need right now.

“People are already anxious about the rising cost of living and paying their bills this winter. Now they face years of tax hikes under a Tory government that is taking them for granted.

“Swathes of lifelong Conservative voters in Blue Wall areas feel the government is no longer representing them. It's no shock that many are now shifting to the Liberal Democrats instead."


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