UK Tax Thresholds Frozen Until 2031, Raising Bills as Pay Rises

What changed

UK income-tax and National Insurance thresholds will remain frozen at current levels until April 2031. The personal allowance stays at £12,570, while the higher-rate threshold remains £50,271.

After April 2031, thresholds are expected to rise with inflation. That would eventually allow more earnings to escape tax, but the freeze will keep increasing bills for many taxpayers in the meantime.

Why it matters

The freeze works quietly. As wages rise, more of each pay packet moves above the point where tax starts. Someone earning more may still have less of their raise left after tax than they expected.

The OBR estimates the policy will bring in £58bn in 2030-31. By then, 6.8 million more people are expected to pay income tax, while another 5.4 million are expected to enter the 40% higher-rate band because the thresholds have not moved.

The difference is visible in the thresholds themselves. If the personal allowance had kept pace with inflation over the past five years, the first £16,070 of earnings would now be tax-free. Instead, income above £12,570 is taxed at 20%. The higher-rate threshold would have reached £64,470, rather than remaining at £50,271.

Low-income pensioners are being treated separately. The basic state pension is expected to rise to £13,036 next April, which would otherwise push it above the personal allowance. A new Pension Tax Allowance is planned to ensure people receiving up to the full new state pension do not pay income tax.

The post-2031 increases are expected to track inflation, but the detailed schedule is not yet set. Until then, the practical effect is straightforward: ordinary pay rises can pull more people into the tax system and push others into higher rates, even when the headline tax rates stay unchanged.