Chancellor Rachel Reeves presented the Spring Statement in the House of Commons today, focusing on potential tax adjustments. The current freeze on personal tax thresholds is expected to extend until the conclusion of the 2030/31 fiscal year, with initial plans for unfreezing in April 2028 being postponed for an additional three years as announced during the Budget last November.
According to the Office for Budget Responsibility, the prolonged freeze is estimated to lead to an increase in the number of basic-rate, higher-rate, and additional-rate income tax payers in the 2029/30 tax year.
In her recent Spring Statement, Chancellor Rachel Reeves did not introduce any new changes to the tax thresholds, indicating that the freeze will persist until the end of the 2030/31 tax year. The concept of freezing tax brackets, known as fiscal drag, gradually moves more individuals into higher tax brackets over time as their incomes rise. This practice is often referred to as a stealth tax, enabling the government to collect more taxes without adjusting the tax rates directly.
As of now, the personal allowance stands at £12,570, marking the threshold before individuals are liable to pay income tax. Earnings exceeding this amount are subject to the basic 20% income tax rate. The higher 40% rate is applicable to incomes surpassing £50,270, while the additional 45% rate is triggered when earnings exceed £125,140.
Moreover, the threshold for commencing National Insurance contributions aligns with the personal allowance at £12,570. Individuals contribute 8% in National Insurance on earnings above this threshold, with a 2% rate applied to earnings exceeding £50,270.
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