Will Burnham Raise Income Tax or Let Fiscal Drag Do the Work?
Fiscal drag works like a slow tide. Tax thresholds stay frozen while wages rise and more income quietly becomes taxable. Burnham has promised not to raise the main income tax rates.
But thresholds are already frozen until 2031. That freeze alone pulls more people into higher tax bands every year without anyone technically “raising taxes.” It raises billions while keeping the headline rates untouched.
The Labour manifesto made a clear pledge of no raising of income tax, National Insurance, and VAT, meaning any additional revenue is more likely to come from that same creeping threshold freeze than from any direct rate change. This gradual effect has real purchasing consequences as higher prices from policies like tariffs can further squeeze household budgets.
How Burnham’s Review of Employer National Insurance Could Affect Your Pay
Fiscal drag works quietly on the employee side of the pay equation. Employer National Insurance works on the other side, hitting businesses directly.
Workers never see it on their payslips but they can still feel it. When employers pay more just to keep staff on the books, there is less money left for pay rises or new hires. Central bank policy can indirectly influence wage growth and hiring costs through interest rates and broader economic conditions.
SPICe analysis estimates the rise costs employers around £890 extra per year for someone on the real living wage. Burnham has called the increase the wrong decision and said he would re-evaluate it, though no firm reversal has been promised yet. For workers on the Scottish median wage, that figure climbs to around £1,053 extra in tax per year for their employer.
A YouGov survey of 1,000 business leaders found that 56% of employers said taking on staff had become more complex over the past 12 months, with over half worried about unintentionally breaching new employment laws.
Will Burnham Tax Your Wealth and Property Instead?
When people think about taxes, they usually picture the chunk taken from their wages each month. But Burnham is reportedly more interested in taxing what people *own*. He has suggested replacing stamp duty with a land value tax. He has also shown support for the Fairer Share model, which charges 0.48% annually on a property’s assessed value. A £3 million home could face around £14,400 a year. Higher-value properties would feel the biggest squeeze. Council tax could also get a modern makeover, since current bands still use 1991 valuations. That feels a bit like pricing a Tesla using a Ford Fiesta manual. Second homes and investment properties would face a doubled rate of 0.96%, hitting landlords and those with overseas holdings particularly hard.
