For households, the Chancellor brought forward the cut to the basic rate of income tax from 20pc to 19pc and reversed the National Insurance rise - a giveaway worth £22bn next year. 

It was sold as a radical departure in Britain’s tax policy, the biggest cuts for 50 years. But the Chancellor gave with one hand and took with the other.

Kwarteng’s mini-Budget is as much about what the Chancellor didn’t do as what he did. He crucially decided to keep Rishi Sunak’s policy of freezing multiple tax thresholds for four years, a stealth raid that has been turbocharged by inflation.

“If it is tax cutting, it's not very tax cutting [when] taken in the round,” says Tom Clougherty, research director and head of tax at the Centre for Policy Studies.

“They did cut National Insurance rates but they had only raised them in April… the income tax basic rate cut Rishi Sunak had already announced, and it's been brought forward by year so again that’s a bit of a tax cut but not a huge one.” 

Clougherty says the cuts need to be weighed up against “the year by year impact of the threshold freeze”.

The market-rattling mini-Budget was perhaps not as radical as investors feared when the full picture on tax is considered, experts say.

As Britain emerged from the pandemic borrowing binge, Rishi Sunak decided to freeze a number of tax thresholds for four years, such as the personal allowance and higher rate limit on income tax. 

Rising prices and wages over that period will push taxpayers into higher bands, generating more revenue for the Exchequer. This stealth tax was intended to help shore up the public finances but the “fiscal drag” effect has proved to be enormous thanks to the highest inflation for 40 years. 

The Institute for Fiscal Studies estimates that for every £1 households gained from the personal tax cuts announced by Kwarteng, they will lose £2 from the freezes to tax thresholds and benefit increases by 2025-26. The Exchequer will get a £41bn boost from households paying extra tax under this fiscal drag effect but families will get just £20bn back in personal tax giveaways.

Doug McWilliams, deputy director at the Centre for Economics and Business Research, says: “The fiscal drag pushes up the tax take for virtually everyone, much more than the 1p cut the income tax rate.

“There were some taxes that were cut: stamp duty and so on. There were some taxes that would have gone up that he didn't put up. These are genuine gains compared with the alternatives.”

The average household will face a 3.3pc hit to their incomes, equivalent to £1,450, from the freezes alone. The personal allowance freeze, for example, will cost the typical basic and higher rate taxpayer £500 and £3,000 by 2025-26, respectively.  

Not only are taxpayers paying more to the Exchequer from fiscal drag but more Britons than ever before face demands from the taxman. 

A record-matching 66pc of adults will be paying income tax by 2025-26 - an additional 1.4m - while an all-time high of 14pc will pay the higher rate, an extra 1.6m. The proportion of taxpayers paying the higher rate is double the share in 2009-10 and almost four times that in 1990.

Tom Waters, economist at the IFS, says: “The tax burden on households will be going up in the coming years and that’s the combined consequences of two offsetting effects: the tax cuts that have been announced and these fiscal drag freezes.”

“They are less transparent and the second thing is they're a lot more uncertain,” he says.

“Over the Conservative leadership contest, there was an enormous amount of discussion about the National Insurance rise and virtually none about the income tax threshold freeze,  even though the income tax threshold freeze was actually a bigger tax rise than the NICs rise.”

Indefinite freezes, such as the £150,000 additional tax rate threshold, are “particularly unjustifiable” as they are not typically announced, he says.

This has long been a tactic used by the Government to stealthily either boost tax revenue or reduce spending in real terms by freezing the cash value of the thresholds. 

The problem with the sneaky strategy is that the amount raised or saved from the policy cannot be controlled by the Chancellor. Instead it depends entirely on inflation and wages, which are out of the control of ministers.

Perhaps one of the more absurd examples is the £10 per year Christmas bonus, which is paid every December to pensioners and people on certain benefits. 

As the IFS points out, the bonus was set at £10 in 1977 but has been frozen at that level ever since, becoming less and less generous each year. If it had increased in line with prices, the Christmas Bonus would be worth £56. 

This effect becomes quite a squeeze on incomes when applied to the biggest taxes and benefits. If the income tax personal allowance had not been frozen, the point at which workers begin paying it would rise from £12,570 in 2021-22 to £12,950 in 2022-23. Over a four-year freeze this effect is only amplified, causing a large impact.

Given how much the Chancellor will rake in from fiscal drag, some believe the extreme reaction to the mini-Budget was excessive. 

Gilt yields soared above 4pc and the pound crashed to record lows in the days after amid fears that Kwarteng was rolling the dice with the country’s finances. But fiscal drag is likely to help the public finances considerably, something an official forecast by the Office for the Budget Responsibility may have shown if the Chancellor had allowed it.

McWilliams says: “The extent to which the markets got spooked by the Budget was partly on the basis of them not really being very good at doing the mental arithmetic, which was actually available at the time.

“We showed it was a much smaller Budget than people had been led to think.”

The CEBR believes the fiscal position is far stronger than markets assume because of a combination of fiscal drag, an overestimation of the cost of tax cuts by the Treasury and an expected fall in gas prices. It expects borrowing to fall to £64bn in 2023/24, with the Government running a surplus by 2025/26 if energy prices ease as forecast.

“It’s one of the things that makes the slightly hysterical reaction to the mini-Budget quite hard to wrap your head around,” says Clougherty.

“We really were only going back to the tax burden of like a year ago,” he says.

“There's a reason why freezing thresholds is quite a good way to raise money and it's because people don't notice it as much as the more explicit increases to tax rates. 

“But maybe equally, you don't get the fiscal conservative benefits of raising taxes in that way, again because it flies somewhat under the radar.”  By Tom Rees, Telegraph