Will the income tax threshold freeze be extended?

0:02Hi, I'm Charlie Duffield and welcome back to The Standard Podcast. If you're new here, hit follow and give us a rating. For all the latest news, head to standard.co.uk. Coming up later in the show, the new London hangout attracting the capital's A-list celebrities.

0:26But first, the government has left open the possibility of extending the freeze on tax thresholds which has seen millions of people dragged into paying higher rates. Tax thresholds are the income levels at which people start paying national insurance or income tax or have to pay higher rates and are typically increased every year in line with inflation. People start paying the basic rate of income tax of 20 % once they earn over£12 ,570 and the higher rate of 40 % once their income goes above£50 ,270. However, income tax thresholds have been frozen since 2021. During the budget last October, Chancellor Rachel Reeves said the freeze would be lifted from 2028.

1:18She said that extending the threshold freeze would hurt working people and that it would take more money out of their payslips. But her deputy, Treasury Minister Darren Jones, declined to repeat her promise today as the government scrambles to balance public finances. Extending the freeze of income tax thresholds would raise over£38 billion a year in 2029-2030, according to the Office for Budget Responsibility. In London, the median full-time salary is£41 ,866, pounds. So many senior health workers, police officers, teachers and employees in the private sector are being hit by the fiscal drag of the income tax threshold freeze, pulling them into paying the higher rate.

2:06Meanwhile, the fiscal watchdog has warned that the UK's state finances are on an unsustainable path due to a raft of public spending promises the government cannot not afford in the long term. Joining us now is Pranesh Narayanan, a research fellow within the Institute for Public Policy's Centre for Economic Justice. Pranesh, the government has left open the possibility of extending the freeze on tax threshold, which was meant to come to an end in April 2028. Why is this being considered? We know that the global economy has been performing worse than expected this year, largely as a result of policies from the White House causing trade instability, the tariff policies of Donald Trump, also because of conflicts flaring up across the world.

2:57These things all global in nature, but have an impact on the UK economy and how much we're expected to see growth and therefore tax revenues. It's possible that the government is going to need to increase taxes this autumn in order to make sure that they have the revenue they need to continue to fix public services and invest in things like infrastructure, but also in order to deliver the things that people really want, in order to deliver solutions to the cost of living crisis and to issues around housing and community infrastructure, things like that. And what would the impact of this be, particularly on working people?

3:37One thing to note is that income tax and freezing income tax thresholds is just one of many options that the Chancellor has to raise tax revenues. Of course, this wouldn't be ideal from a cost of living perspective where we've seen much higher than average rent increases since the pandemic. Issues around the cost of living is a sort of a day to day experience that people in London are facing. The tax revenue has to be raised from somewhere and it would have an impact, particularly on people who are expecting to sort of move between tax bands as a result of pay rises. The ones who are moving from a sort of basic rate of salary, moving up to like a 50K type salary.

4:19That's where the impact is most concentrated because you're being dragged from the sort of basic threshold to the higher rate threshold. and so it's sort of middle income earners who are most impacted. You've already mentioned the factors which are contributing to the UK's poor state finances. What should happen to balance the books? I mean, one striking fact is that wealth in the UK is six times national income. Last time Labour was in power in the sort of 90s, it was four times national income and the tax system hasn't really kept up with that fact. We aren't raising much more revenue from wealth and income from wealth since this sort of wealth boom has taken place.

5:04And so one of the options that the government should seriously start considering is to really focus on gathering income and revenue from the people who have benefited from that wealth boom and not from things like earnings from work, where we've seen a decade of stagnant wages. And this is an area which is quite complicated, but it's possible to increase taxes on the people who have benefited from sort of vast growth in wealth over the last couple of decades. People who own lots of assets. I mean, a lot of it obviously has come from housing, but particularly financial assets. We can think about things like capital gains tax, which if we reform properly could actually raise several billion pounds worth of revenue without dragging loads of people into the sort of new tax system.

5:54We had a system under Nigel Lawson, Conservative Chancellor, in the sort of late 80s. Income tax rates were actually the same as capital gains tax rates. And that system has sort of gone away in the decades following. But if we were to restore that system, for example, we would have a much fairer tax system and you could raise revenue from the most sort of wealthy people in society. Finally, do you have anything else to add? As I mentioned, such a system has been in place in the UK before. There was a system where you had equal rates of taxation between income and capital gains, but there was allowances for inflation and things like that, which made it a bit fairer.

6:30Moving back to a system like that could be very beneficial, not just for taking in more revenue for the government, but also it makes the tax system itself more efficient and incentivizes investment and growth. There's other forms of taxation around, you know, taxation of property, things like council tax and things, which there could be maybe longer term reforms as well that could improve revenue and make it slightly fairer. My point is, is that there's several options on the table and the government hasn't made any decisions yet. But it's good that they're considering revenue raises rather than spending cuts.

7:07I think there's really a good reason to start looking into the sources of revenue for wealth. let's go to a break coming up in part two a sneak peek inside the A-list's favorite London gym we'll see you back here in just a moment

7:32welcome back now there's a new celeb hangout in the capital and it's somewhere you probably won't be familiar with. If you go inside the discreet entrance of Before the Lights in Fitzrovia, you'll be transported into a celebrity playground which is turned into a safe space for high-profile creatives in London. Its commitment to balancing fitness and creativity means the club has cultivated a loyal band of members. I spoke to lifestyle journalist Jessica Salter to find out more. Jessica, like a lot of big cities, London is known for its bougie gyms. What makes Before the Lights so special? It's a really intimate space that you kind of, actually it's very hard to find the entrance to it.

8:18There's no advertising, you don't know it from the door, and then you go down the steps and you go into this very cosy but chicly designed space and it's very evident that there's lots of creative forces around. So there's a library of books, there's artworks. And then there's this incredible recording studio, which is lined with 2000 antique books. And it's owned by Dominic Cooper and his brother Nathan. And so there's all these little sections where it doesn't even seem like a gym. It seems like a creative workspace. So which celebrities have been spotted there? Well, I think they've got a lot on their books that they can't talk about.

8:55But I know that the The actress Olivia Cooke has been there. The DJ Reg James goes there. Henry Ashton, one of the founders, has been training Nicholas Holt for years. I'm not sure if Nicholas goes to the gym, but he's connected in some way. Well, there's also Nigel Slater, the cookery writer, who goes there and loves the gym and always comments on their Instagram. It sounds like it encompasses a lot more than just gym facilities. Is that right? And how expensive is it? They said the reason that it works so well for them is that their members feel like it's a very safe space and that they can connect with other people.

9:31So they will be off filming for months and have not seen someone for ages and they can go and catch up in the kitchen without being photographed having a coffee on the street. But the actual gym itself is very lovely and it's exactly what you'd expect from a luxury gym. So it's got state-of-the-art equipment, there's reformer Pilates bed, the boys do personal training, there's infrared saunas, cold plunges, dedicated treatment room. It's not that expensive. It's£275 a month, which compared to our other London spaces like Third Space or even Soho House, it's on a par with that. It's definitely the community aspect that makes it attractive for their members.

10:11It's a place that they can connect and not feel like they're being gawped out, I suppose, by the rest of us. So tell me more about the founders and their story. So the founders are George Ashwell, Josh Betteridge and Dave Hastie. And they all met studying sports rehabilitation at Bristol. And when they graduated, Josh and Dave moved to Melbourne to work as sports rehabilitators. and Ashwell was a year behind them. But he had this childhood friend, the actor Nicholas Holt. At the time, Nick Holt was working on X-Men First Class and introduced him to the lead trainer. So George started working with young film stars.

10:54And then Dave and Josh came back and also started working with the film stars. And so that's how they got their route in. And they saw that there was this real kind of need for actors to have their own space and they founded their own club in 2020 and it was in a different site to the one that I'm describing in the article but they saw how much of a need there was and how much of an appetite for this exclusive space. And I assume it's only for celebrities? I think so I don't know what their application process is exactly like but there's about 180 members and I'd say from the space there's not really much room for it to expand in that site for much more than that.

11:35So I'm imagining they won't let most of us in. Finally, do you have anything else to add? So what I find really fascinating about the three founders is they are absolutely not gym bros. They themselves are quite creative. They've designed and curated this space. They've even got their own podcast, which of course they make in their own recording studio. And they interview some of their famous members, which includes a NASCAR driver and a major league all-stars player, about how they land their dream jobs, juggling the challenges of life in the creative world, and how they mentally and physically prepare for roles, which obviously touches on their specialism.

12:13And what they said is the conversations that they have in the gym with their clients, and they see a different side of people than the public sees of these, you know, actors and creatives it's quite lovely that they have this space where they can explore that as well it's a really good podcast it's called before the lights the same as the gym's name and they've got some really lovely interviews on there and that's the standard for all the latest news head to standard.co.uk if you'd like to get in touch please do drop us a line at podcasts at standard.co.uk we'll be back here tomorrow at 4pm we'll see you then