British economists warn that the lowest-income taxpayers will see their tax burden rise by £600 a year following the Chancellor’s freeze on the personal tax threshold.

Rachel Reeves announced in her budget last week that she would continue to freeze the amount of money people can earn tax-free until 2028.

According to an analysis by the National Institute of Economic and Social Research (NIESR), this stealth tax will worsen the situation of the poorest 10% of employees, who earn hundreds of pounds a year.

Low-income families will be further penalized as the living standards of the poorest 40% of households will not return to pre-2022 levels until the end of 2026-2027 at the earliest, the institute said .

Professor Adrian Pabst, deputy director of public policy at NIESR, said some government tax decisions risk “discouraging further business investment” and hitting poorer households.

Photo of a female barista preparing coffee with a coffee machine. Britain’s lowest earners could see their tax burden rise by £600 a year

Rachel Reeves announced in her budget last week that she would continue to freeze the amount of money people can earn tax-free until 2028.

“Keeping the personal tax thresholds frozen for another three and a half years will leave the poorest 10 per cent of earners worse off by around £600 a year,” he said.

“It would be better for the living standards of households who have been hardest hit by the shocks of recent years if the government increased income tax on the highest earners while thawing the thresholds.

“It is time to throw off the budgetary shackles we have imposed on ourselves and do what is right for the economy and society.”

It came as the Primark boss claimed yesterday that the general public would bear the brunt of Rachel Reeves’ “ill-judged” budget – which would saddle her company with “tens of millions” in extra costs.

George Weston said the “burst of tax rises” announced by the Chancellor – including her £25bn raid on employers’ National Insurance Contributions (NICs) – would fall on the shops.

Retailers also face a 6.7 per cent rise in the minimum wage and a £140 million rise in business rates.

The comments come as a leading economic think tank warns that rising NICs would lead to a loss of jobs.

And the Office for Budget Responsibility said fiscal measures aimed at boosting growth would “not make a difference”. At the same time, separate monthly data suggest the economy is losing steam.

It follows reports that bosses of major retail and hospitality firms and trade associations told Business Secretary Jonathan Reynolds that the Budget risks damaging consumer confidence and exacerbate the challenges facing the UK economy.

Sky News reported that companies including Burger King UK, Fuller Smith & Turner, Greene King, Kingfisher and supermarket chain Morrisons were represented on the call.

The Institute for Fiscal Studies warned MPs yesterday that the budget and workers’ rights overhaul could force people into self-employment.

IFS director Paul Johnson told the Commons Treasury Committee: “The more employment rights there are, the more auto-enrolment, the higher the National Living Wage and the more you add national insurance to these things – each of these adds to the incentive to take up self-employment. » or create an independent company.