Chancellor Rachel Reeves presented the Spring Statement in the House of Commons today, addressing any significant tax changes. The current freeze on personal tax thresholds is extended until the end of the 2030/31 financial year, originally planned to be unfrozen in April 2028 but now extended for an additional three years according to the Chancellor’s Budget announcement in November.
This extension is projected to result in more taxpayers across different income brackets for the 2029/30 tax year, as reported by the Office for Budget Responsibility. Despite this, in today’s Spring Statement, Rachel Reeves did not introduce any further alterations to the tax thresholds, meaning they will remain frozen until the end of the 2030/31 tax year.
The freezing of tax brackets is commonly referred to as fiscal drag, leading to more individuals moving into higher tax brackets as their incomes increase over time. Described as a stealth tax, this approach allows the government to collect more tax without increasing the tax rates individuals pay directly.
Currently, the personal allowance stands at £12,570, determining the threshold before income tax obligations commence. Earnings above this trigger the basic 20% tax rate, with the higher 40% rate applying to incomes exceeding £50,270, and the additional 45% rate levied on earnings surpassing £125,140. The National Insurance payment threshold is also set at £12,570, with an 8% contribution rate for earnings at this level and a 2% rate for incomes exceeding £50,270.
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