Five million low income Brits to be hit by huge tax rises within weeks costing workers £100s

FIVE millions workers are to be hit by tax rises within weeks that will cost them hundreds extra a year.

It comes as millions of UK households are already battling a cost of living crisis which is forcing some to choose between heating and eating.

From April, National Insurance Contributions will go up by 1.25 percentage points, costing the average worker hundreds of pounds more a year.

At the same time, income tax bands are being frozen, meaning workers are effectively taking a pay cut.

Soaring inflation is pushing up the price of everything from energy bills to groceries.

A new energy price cap will come into effect in April, adding £693 a year to the average household bill.

And millions of workers are now set to be hit by a so-called “stealth tax bombshell”, which will reduce their take home pay by hundreds.

The Centre for Economics and Business Research (CEBR) has warned that more than nine million workers will pay more because of the tax freeze.

Five million lower-paid workers could have to pay income tax for the first time as a result of the measures.

And another four million workers will be dragged into the higher income tax bracket, which will see them pay 40% tax on their earnings.

The CEBR and others have called on the government to reverse its decision over the taxes.

But the Chancellor confirmed last month that it would go ahead with the measures.

The think tank said the freezing of tax allowances and “bad forecasting of inflation” meant the number of people paying the higher rate of income tax will almost double to 8.1million.

The move will raise £40billion for the government coffers, the CEBR said.

What is National Insurance and why is it going up?

You pay National Insurance when you’re employed and earning more than £9,568 a year, or £184 per week.

The current rate is 12% on earnings between £184 and £967 a week, and this will increase to 13.25% from April.

Earnings over this amount will be subject to an additional 3.25% tax, up from 2%.

Under the increase, someone with a salary of £25,000 will pay an extra £193 in tax each year.

For those earning £35,000, it’s an extra £318.

The hike is billed as an increase of just 1.25%, but experts including Martin Lewis have warned that means taxpayer contributions will rise by more than 10%.

Money.co.uk’s James Andrews said: “With the country in the midst of a cost of living crisis, the increased rate is set to affect millions of workers, particularly those on lower wages”

Typically, income tax bands are increased in line with inflation each year to ensure they keep up with the cost of living.

When they remain the same but inflation rises, workers effectively take a pay cut.

Inflation this month hit a 30-year high of 5.5% and is expected to reach 7% by spring.

The Bank of England is widely expected to continue raising interest rates to help stave off inflation.

But this will heap further misery on millions of homeowners, who will see mortgage repayments go up by hundreds.

You can use our , created with Blick Rothenberg to see exactly how much extra you’ll pay.

The new rates kick in from April this year, when the new tax year begins.