Tax Hacks is written by Mike Warburton, previously a tax director with accountants Grant Thornton, and is published twice a month on Tuesdays. You can email Mike on taxhacks@telegraph.co.uk 

When Gordon Brown was chancellor he was frequently accused of taxing by stealth. Rather than raising income tax by increasing the tax rate he frequently resorted to either freezing the personal allowance and tax bands or increasing them at less than inflation.

Over time the personal allowance fell to a level at which some of our lowest earners paid it. With the coalition government of 2010 the Conservatives agreed to adopt the Liberal Democrat manifesto policy of reversing this and substantial increases in the personal allowance followed. As a consequence, several million of the lowest earners benefitted from lower tax bills and others came out of income tax altogether.

Our current chancellor has a tough job trying to convince international markets that he is serious about improving the state of our public finances following the necessary costs caused by the Covid pandemic. At the same time in yesterday’s Budget he responded with confidence to the political challenges of levelling up, funding the health service, improving education and supporting enterprise. Nevertheless he has to be careful not to fall into the same trap as Mr Brown. 

In the supporting papers to the Budget we have many details that were not in the speech itself. We had confirmation of a freeze of the inheritance tax threshold at £325,000 for the next five years. The Treasury expects this alone to raise almost £1bn.

We also had confirmation of a five year freeze to the pension lifetime allowance, the amount you can save into a pension before paying penal tax charges. This is on course to raise a further £1bn. It is very easy to assume that this only hits the rich, as the labour Treasury minister Ruth Kelly said when the cap was introduced. She estimated that only the wealthiest 5,000 would be affected. We now have experts in the pensions industry saying that more than 1.6 million people will be caught and I fear that this will only increase with time.

One of the effects of the cap is to discourage work, particularly those in the public sector including many doctors. As a consequence of this, and the annual allowance restrictions, many are choosing to retire early. The Chancellor says he is a champion of making work pay, but the pension cap has the opposite impact.

The numbers may not be as big, but the five-year freeze on the capital gains tax annual allowance will bring in another £65m. This is, of course, on top of the freeze on income tax personal allowances and National Insurance thresholds which over the same period is projected to raise over £19bn. The Government will raise another £480m from freezing the VAT registration threshold.

That takes the total bill solely from stealth taxes to £21.5bn over just the next five years.

Over time these tax increases will have a real impact on families across Britain, particularly if the Government and Bank of England find that it is more difficult to tame inflation than the Office for Budget Responsibility assumes. Higher energy costs may be just the beginning of tough times to come.

I hope that I am wrong, but there is surely a risk that further problems constrain the man in Number 11 and he falls into the same trap as Mr Brown and becomes another stealth tax chancellor. 

taxhacks@telegraph.co.uk