Chancellor Rachel Reeves presented her Spring Statement in the House of Commons today, focusing on potential tax adjustments. Currently, personal tax thresholds are frozen until the conclusion of the 2030/31 fiscal year. Originally planned for unfreezing in April 2028, the Chancellor extended this freeze by an additional three years in her Budget announcement last November.
Following the extension, the Office for Budget Responsibility projected an increase in the number of taxpayers affected by the freeze. By 2029/30, it is estimated that 780,000 more basic-rate, 920,000 more higher-rate, and 4,000 more additional-rate income tax payers will be impacted.
Reeves’ Spring Statement today did not introduce any further 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, termed fiscal drag, results in individuals being pushed into higher tax brackets as their income rises over time.
This practice, often referred to as a stealth tax, allows the government to collect more taxes without overtly increasing tax rates. As of now, the personal allowance stands at £12,570, determining the threshold before income tax obligations commence. Income above this amount incurs the basic 20% income tax rate, with the higher 40% rate applying to earnings exceeding £50,270 and the additional 45% rate triggered beyond £125,140.
Similarly, the National Insurance payment threshold is set at £12,570, with an 8% contribution on earnings at this level and a 2% rate on income surpassing £50,270. Reeves’ Spring Statement confirmed the continuation of the existing tax thresholds, emphasizing the ongoing freeze until the conclusion of the 2030/31 tax year.