UK income tax thresholds frozen until 2030 – what it really means

As we approach 2026, it is important to take note of the latest budget policies and announcements from the Chancellor.

Rachel Reeves recently confirmed that income tax thresholds will stay frozen until the 2030–31 tax year, extending a policy first introduced in 2021.

As wages rise with inflation, but tax bands don’t, more people can be shifted into higher tax brackets without any official tax rate increase.

·       Personal allowance stays at £12,570

·       Higher-rate tax still starts at £50,270

·       Additional rate remains at £125,140

·       Over time, inflation pushes earnings into higher bands

According to the Office for Budget Responsibility:

·       If thresholds had risen with inflation, the personal allowance would be £4,900 higher by 2030

·       The higher-rate threshold would be £20,100 higher

·       The share of people paying higher or additional-rate tax rises from 15% (2021) to 24% (2030)

Real impact:

·       Someone earning £50,000 is estimated to pay £8,165 more in tax between 2020–2031

·       Moving into higher-rate tax also reduces savings allowances, increases dividend tax, and raises capital gains tax

Something to consider for the forthcoming years!