The figures reveal the scale of the cost to families of the government’s decision to freeze the personal tax allowance and higher rate tax threshold until 2025/26, compounding the growing cost of living crisis.

The new analysis by the House of Commons Library has found the freeze will mean an additional 1.5 million people on low pay will be dragged into paying income tax by 2026, while a further 1.25 million people will fall into the higher rate tax bracket. The research is based on modelling using the latest inflation forecasts from the Office of Budgetary Responsibility.

The Liberal Democrats are demanding that the government drops their planned stealth tax raid that will “clobber families who are already feeling the pinch,” amid soaring energy bills and the rising cost of living.

Regional figures show that London and the South East are set to be hardest hit by the stealth tax, with an average hit to incomes of £500 per household. An estimated 230,000 more people in the South East will be paying the higher income tax bracket and an extra 210,000 will be paying income tax, leading to a total hit of £1.9 billion to taxpayers in the region in 2026. In London, there will be 210,000 additional higher rate taxpayers and 155,000 more people paying income tax, with a total tax bombshell of £1.8 billion. Across all regions, household disposable incomes are estimated 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.

Liberal Democrat Treasury Spokesperson Christine Jardine MP said:

Boris Johnson must drop this unfair stealth tax that will clobber families who are already feeling the pinch.

People are worried about the rising cost of living and paying their bills this winter. Now they face years of tax rises under a Conservative government that is taking them for granted.

Many lifelong Conservative voters in Blue Wall areas feel this government no longer represents them. It’s little wonder that so many are now turning to the Liberal Democrats instead.

Quoted in the Telegraph, Paul Johnson of the Institute for Fiscal Studies said people faced a squeeze this year that “could well be worse than the financial crisis”. Torsten Bell, the chief executive of the Resolution Foundation said: “April in particular is going to be a cost of living catastrophe, and the year as a whole will be defined by the squeeze.”