I hate these two ‘secret’ taxes which now generate £20bn a year for the Treasury, says LEE BOYCE

Before a quote, there is always an element of kite flying to get an idea of ​​how popular or unpopular a move will be.

There are usually about a dozen kites, many of which are cut before the tax event.

But in this first budget of the Labor government it feels like hundreds of kites are flying at once, getting tangled up in a mess.

As This is Money editor Simon Lambert wrote last week, it’s been 100 days of miserabilism, and we also talked on our podcast about whether this budget increase needed to have such a degree of pessimism.

While there has been a lot of noise around the possible restructuring of inheritance tax, our pensions and our ability to accumulate wealth, there are two areas of tax that are becoming ugly invisible beasts lurking in our daily lives.

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

The main reason is the tax burden – two words that should fill us with Halloween dread – that continues to drag more people into higher tax brackets.

While you will know about income tax, the most secret part of this is how much interest is generated on savings from this take.

Savers now pay the lion’s share of income tax revenue since the financial crisis.

Savers will contribute a larger proportion (3.45 per cent) of income tax revenue this financial year than at any time since 2007/08, according to Coventry Building Society.

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

Over the past 15 years, the proportion of income tax generated through savings interest has averaged around 1.49 per cent each year, with the lowest being 0.61 per cent during 2021/22.

Since then, the percentage has risen almost six-fold to 3.45 per cent, due to higher interest rates and frozen tax thresholds (around £9bn).

While many savvy This is Money readers will know about their personal savings allowance and how much they can earn in interest before paying taxes, there are large sections of people who simply can’t believe they are taxed on their savings or have no idea. about the PSA.

That’s what makes Isas so important, and yet the very future of our tax-free friend could be at stake.

The Chancellor has previously proposed a lifetime grant of £500,000 for them, while the Resolution Foundation earlier this year ruffled some feathers by suggesting a cap of £100,000 (which I rebuked 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 the tax drag, but Government forecasts suggest more people will pay income tax on their savings as exceed personal savings allocations. .’

We pressured the previous government to make the PSA a little more generous. As well as Isas, tax-free premium bonds, boosting your pension and maximizing your dividend allocation are avenues to consider, but who knows if any of them could be changed.

> Five tips to avoid the tax on interest on savings

Now on to secret tax number two that’s in full Godzilla-style uproar: the insurance premium tax.

Last year, I revealed that IPT raised £7.45 billion for the Treasury in the 2022/23 financial year. Figures for 2023/24 show it has grown another 9 per cent to £8.1bn. It makes me very hot under the neck.

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

That rate went from 2.5 per cent when it was introduced in 1994, before the Conservatives raised it from 6 per cent in 2011, and then further increases, including 12 per cent in 2017.

This is a classic stealth tax. This tax is applied directly to insurers, who typically pass most of the cost on to those who purchase the product, and is one of the reasons why their annual premiums are now much higher than before.

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

Transport Secretary Louise Haigh tweeted last week: ‘Car insurance is essential, not a luxury. But the rising cost of coverage has hit drivers hard.

‘Today I have launched a working group to give this the attention it deserves. “We will eliminate cost drivers to ensure drivers get a fair deal.”

Well, surely IPT is the starting point given the huge figures cited above?

The problem with these two taxes is that nothing will be done about them because they are a little out of sight, and it will be us, the fools who buy insurance and create wealth and follow the law, who will have to endure.

A tax take from a few billion for IPT and savings interest a decade ago to almost £20bn this year is a huge leap for ordinary Britons.

We’ll keep these taxes in the spotlight as much as possible, and we’ll tune into This is Money next Wednesday as we reveal what Rachel Reeves’ first budget really means for you… and whether any of the hundreds of kites actually flew. .