“Historic tax increases” amid high levels of inflation will cause middle earners to be worse in the short term, says the Institute for Fiscal Studies.
Low-income households will feel real pain says the IFS, waiting more than a year for their incomes to catch-up. In some cases, this may never happen.
Chancellor Rishi Sunak meets with the Governor of the Bank of England Mark Carney in Downing Street (Photo: Getty Images)
What are the predictions?
The cost of living could rise at its fastest rate for 30 years, warned The independent Office for Budget Responsibility (OBR).
IFS’s analysis shows that in the next 12 months, middle earners will feel that their pre-tax pay just about meets their outgoings.
Once income tax increases, pay will fall by about 1% for middle earners, or £180 per year, after inflation.
Forecasts predict that inflation, which measures the change in the cost of living over time, will jump from 3.1% to 4% in 2022.
This is because of increased demand for energy. Simultaneously, ongoing supply chain issues as factories struggle to recover from the pandemic.
Who is middle income?
A middle income earner in the current context is someone earning around £25,000 a year, pre-tax. This is according to the IFS.
Living standards will be squeezed for middle earners, say IFS (Photo: Getty Images)
In 2019, median household income was £29,000, according to estimates from the Office for National Statistics (ONS) Household Finances Survey.
Had average earnings kept pace with trends seen before the financial crisis in 2008, they would have been 40% higher, research found.
Mr Sunak defended his Budget, telling the BBC that it had “cut taxes for millions of the lowest-paid”.
The National Living Wage will also increase next year by 6.6%, to £9.50 an hour.
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HeadlineIFS: ‘Real pain’ predicted for middle earners
Short HeadlineIFS warns millions worse off in 2022
StandfirstChancellor Rishi Sunak also acknowledged in his budget that families are under strain.
“Historic tax increases” amid high levels of inflation will cause middle earners to be worse in the short term, says the Institute for Fiscal Studies.
Low-income households will feel real pain says the IFS, waiting more than a year for their incomes to catch-up. In some cases, this may never happen.
Chancellor Rishi Sunak meets with the Governor of the Bank of England Mark Carney in Downing Street (Photo: Getty Images)
What are the predictions?
The cost of living could rise at its fastest rate for 30 years, warned The independent Office for Budget Responsibility (OBR).
IFS’s analysis shows that in the next 12 months, middle earners will feel that their pre-tax pay just about meets their outgoings.
Once income tax increases, pay will fall by about 1% for middle earners, or £180 per year, after inflation.
Forecasts predict that inflation, which measures the change in the cost of living over time, will jump from 3.1% to 4% in 2022.
This is because of increased demand for energy. Simultaneously, ongoing supply chain issues as factories struggle to recover from the pandemic.
Who is middle income?
A middle income earner in the current context is someone earning around £25,000 a year, pre-tax. This is according to the IFS.
Living standards will be squeezed for middle earners, say IFS (Photo: Getty Images)
In 2019, median household income was £29,000, according to estimates from the Office for National Statistics (ONS) Household Finances Survey.
Had average earnings kept pace with trends seen before the financial crisis in 2008, they would have been 40% higher, research found.
Mr Sunak defended his Budget, telling the BBC that it had “cut taxes for millions of the lowest-paid”.
The National Living Wage will also increase next year by 6.6%, to £9.50 an hour.
