I detest these two ‘secret’ taxes that now raise £20bn a year for the Treasury, says LEE BOYCE

Before a budget is made, there is always an element of kiting to get an idea of ​​how popular or unpopular a move will be.

There are usually a dozen flyers, many of which are cut prior to the budget event.

But this first Labor government budget feels like hundreds of kites flying at once and getting caught up in one mess.

As This is Money publisher Simon Lambert wrote last week, it’s been 100 days of miserabilism – and we also talked on our podcast about whether this budget run-up should have such a level of pessimism.

While there has been a lot of fuss about the potential shake-up in inheritance tax, our pensions and the ability to build wealth, there are two areas of taxation that are becoming hideous invisible beasts lurking in our daily lives.

First of all, the tax on savings interest. This week it was revealed that annual income tax revenues have risen by 8.6 per cent over the past 12 months, equating to £22.6 billion more for the Treasury.

The main reason is the tax barrier – two words that should fill your Halloween fears – pushing more and more people into higher tax brackets.

While you know about the income tax, the more mysterious part of this is how much the savings interest earns from it.

Savers now pay the largest share of income tax revenue since the financial crisis.

According to the Coventry Building Society, savers will contribute a larger share (3.45 percent) of income tax revenue this tax year than at any time since 2007/08.

They have to pay £10.4 billion in tax on savings interest.

Over the past fifteen years, the share of income tax generated from savings interest has averaged around 1.49 percent per year, with the lowest rate of 0.61 percent in 2021/2022.

Since then, this rate has increased almost sixfold to 3.45 percent due to higher interest rates and frozen tax thresholds – or around £9 billion.

While many smart This is Money readers are aware of their personal savings allowances and how much they can earn in interest before they are taxed, there are large groups of people who simply cannot believe that they are being taxed on their savings or have any idea of ​​it its consequences. PSA.

That’s what makes Isas so important – and even then, our tax-free friend’s future could be at stake.

The Chancellor has previously proposed a lifetime benefit of £500,000 for them, while the Resolution Foundation ruffled a few feathers earlier this year and suggested a limit of £100,000 (which I already teased out in April).

As Jeremy Cox of Coventry BS told me: ‘Millions of people are already paying more tax on their hard-earned savings due to budget pressures, but the government’s forecasts suggest that more income tax will be paid on their savings as it exceeds personal savings . .’

We are putting pressure on the previous government to make the PSA a little more generous. As well as Isas, tax-free Premium Bonds, increasing your pension and maximizing your dividend payout are routes to look at – but who knows if anything can be tinkered with.

> Five tips to avoid savings interest tax

Now on to secret tax number two which is a complete Godzilla-like frenzy: insurance premium tax.

Last year I revealed that IPT secured £7.45 billion for the Treasury in the 2022/2023 financial year. Figures for 2023/2024 show this has grown by a further 9 per cent to £8.1 billion. It makes me feel all warm under the collar.

IPT is a tax on general insurance premiums and most policies (auto, home, travel and pet) are charged 12 percent. Most of the general public has no idea about it.

That rate has fallen from 2.5 percent when it was introduced in 1994, before the Conservatives increased it from 6 percent in 2011, and further increases since, including to 12 percent in 2017.

This is a classic stealth tax. This tax is levied directly on the insurers, who then typically pass on the majority of the costs to those who take out the product – and is one of the reasons why your annual premiums are now much higher than they used to be.

Between 2002 and 2011, the total IPT bill was between £2 billion and £2.5 billion. Even in the 2014/2015 financial year the total bill was less than £3 billion.

Transport Minister Louise Haigh tweeted last week: ‘Car insurance is essential and not a luxury. But rising coverage costs have hit drivers hard.

“Today I have launched a task force to give this the attention it deserves. We will root out the factors that drive up costs so drivers get a fair deal.”

Well, surely IPT is the starting point, given the huge numbers quoted above?

The problem with these two taxes is that nothing will get done about them because they’re kind of out of sight, and it’ll be us law-abiding insurance-buying, wealth-building bozos who will have to suck it up.

Tax revenue from several billion for IPT and savings interest ten years ago, to almost £20 billion this year, is a huge leap forward for ordinary Britons.

We’re keeping the spotlight on these taxes as much as possible – and next Wednesday we’ll be watching This is Money, where we reveal what Rachel Reeves’ first budget really means to you… and whether any of the hundreds of kites actually flew .