UK Budget: Tax Thresholds Frozen Until 2031
UK tax thresholds have been frozen until 2031, meaning as wages rise with inflation, millions of taxpayers are being dragged into higher tax bands — a stealth tax costing the average earner hundreds of pounds extra per year. This calculator shows exactly how much more tax you'll pay due to frozen thresholds compared to inflation-adjusted bands.
Ready to run the numbers?
Why: The UK personal allowance and higher-rate threshold have been frozen since 2021 and won't rise until 2031. With wage inflation of 4-6% annually, this 'fiscal drag' or 'bracket creep' silently pushes millions into higher tax bands. By 2028, an estimated 4 million extra people will pay income tax or higher-rate tax compared to inflation-adjusted thresholds. Understanding your personal fiscal drag impact helps you plan salary sacrifice, pension contributions, and other tax-efficient strategies.
How: The calculator compares your actual tax under frozen thresholds (£12,570 personal allowance, £50,270 higher-rate threshold) against what you'd pay if thresholds had risen with CPI inflation each year. The difference is your fiscal drag cost. It projects this forward year by year, accounting for expected wage growth and inflation forecasts from the OBR.
Run the calculator when you are ready.
🇬🇧 Sample UK Salary Scenarios
Click a scenario to calculate fiscal drag impact.
💼 Near Higher Rate (£48,000)
Worker about to move into 40% higher rate tax band due to frozen thresholds.
👷 Median UK Earner (£35,000)
UK median salary worker seeing fiscal drag erode real wages.
💰 Higher Rate Payer (£75,000)
Already in higher rate band, approaching 60% trap zone.
🏴 Scottish Worker (£45,000)
Worker subject to Scottish income tax rates (higher than England).
🎓 Recent Graduate (£28,000)
Entry-level with Plan 2 student loan, rapid expected progression.
⚠️ 60% Tax Trap Zone (£105,000)
In the £100K-£125K zone where effective marginal rate hits 60%.
📊 Enter Your Income Details
Budget 2024 Extension: Tax thresholds frozen until April 2031. This is the longest freeze in UK history.
💷 Income
📉 Deductions & Location
📚 Understanding UK Tax Threshold Freezes
What is "Fiscal Drag" (Stealth Tax)?
When tax thresholds are frozen while wages rise with inflation, more income falls into higher tax bands. This is called "fiscal drag" or a "stealth tax" - you pay more tax without rate increases.
Example: If the Personal Allowance stays at £12,570 but your salary rises from £50,000 to £52,500 (5% increase), your taxable income increases by £2,500, costing you an extra £500-1,000 in tax.
UK Tax Thresholds 2025/26 (Frozen)
| Threshold | Amount | Frozen Since | Frozen Until |
|---|---|---|---|
| Personal Allowance | £12,570 | 2021/22 | 2027/28 |
| Higher Rate Threshold | £50,270 | 2021/22 | 2027/28 |
| Additional Rate Threshold | £125,140 | 2023/24 | 2027/28 |
| NI Primary Threshold | £12,570 | 2022/23 | 2027/28 |
Estimated Extra Tax Due to Freeze (2021-2027)
* Assumes 4% annual wage growth. Individual results vary.
Tax Planning Strategies
💼 Pension Contributions
Contributions reduce taxable income. Salary sacrifice is especially effective for higher rate taxpayers.
🏦 ISAs
£20,000/year allowance. All gains and income are tax-free. Use your full allowance annually.
👫 Income Splitting
Transfer income-producing assets to lower-earning spouse to utilize their allowances.
🎁 Gift Aid & Charity
Charitable donations extend your basic rate band. Higher rate taxpayers claim additional relief.
❓ Frequently Asked Questions
Why doesn't the government raise thresholds?
Freezing thresholds raises significant revenue without announcing "tax increases." The OBR estimates the freeze will bring in an extra £30+ billion by 2027/28, helping fund public spending.
How many more people will pay higher rate tax?
The number of higher rate taxpayers is expected to rise from 4.2 million (2020) to over 7.8 million by 2027 due to fiscal drag. Many first-time higher rate taxpayers will be public sector workers.
Will thresholds rise after 2028?
Current policy commits to the freeze until April 2028. Future governments may extend, modify, or end the freeze. Election manifestos will likely address this issue.
Does Scotland have different thresholds?
Yes, Scotland sets its own income tax rates and bands, with additional brackets. Scottish taxpayers may face different fiscal drag impacts. The Personal Allowance remains UK-wide.
🔗 Related UK Calculators
UK Income Tax Rates 2025/26
| Band | Income Range | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571 - £50,270 | 20% |
| Higher Rate | £50,271 - £125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |
* Personal Allowance reduces by £1 for every £2 earned over £100,000
National Insurance Contributions 2025/26
Employee NI (Class 1)
- • £0 - £12,570: 0%
- • £12,570 - £50,270: 10%
- • Over £50,270: 2%
Employer NI
- • £0 - £9,100: 0%
- • Over £9,100: 13.8%
- • (Increased in Autumn 2024 Budget)
Historical Threshold Changes
What's the £100,000 trap?
Personal Allowance is reduced by £1 for every £2 earned over £100,000, creating an effective 60% marginal rate between £100,000 and £125,140. Consider pension contributions to avoid this trap.
How does the Marriage Allowance work?
A non-taxpayer can transfer £1,260 of their Personal Allowance to a basic rate taxpaying spouse, saving up to £252 per year. Apply through HMRC.
Disclaimer: This calculator provides estimates based on current UK tax policy. Tax laws are subject to change. Individual circumstances vary. Consult a qualified tax advisor for personalized guidance. This is for informational purposes only.
📚 Official Data Sources
Disclaimer
This calculator provides estimates based on current HMRC tax rates and threshold freeze policies. Tax thresholds are frozen until April 2028. Individual tax situations vary significantly. Always verify current rates with HMRC and consult a qualified UK tax advisor for personalized tax planning advice.
For educational and informational purposes only. Verify with a qualified professional.
Answer Capsule: UK tax thresholds are frozen until April 2028. Fiscal drag pulls more taxpayers into higher bands as wages rise—costing the average earner £1,200+ over 6 years. Use the Fiscal Drag Calculator to see cumulative extra tax paid over the freeze period.
What is Fiscal Drag (Bracket Creep)?
Fiscal drag occurs when tax thresholds are frozen while wages rise with inflation. Even if your real purchasing power stays the same, you pay more tax because a larger proportion of your income falls into higher tax bands. The UK government has frozen income tax and NI thresholds until April 2031 - a hidden "stealth tax" costing workers billions.
Frozen Since 2021
Personal allowance stuck at £12,570 - would be ~£14,500 if indexed.
More Higher Rate Payers
1 in 4 UK workers will pay 40% tax by 2031 (up from 1 in 6).
60% Tax Trap
£100K-£125K zone: 40% tax + lost allowance = 60% marginal rate.
What are the Current UK Tax Thresholds (Frozen)?
England, Wales & NI
Scotland (Higher Rates)
When Does Fiscal Drag Hit Hardest?
Near Threshold Workers
Those earning £45K-£55K are most impacted - a 3% raise pushes thousands into 40% tax band.
Fast-Progressing Careers
Tech, finance, and legal professionals with rapid salary growth face accelerated bracket creep.
£100K+ Earners
Effective 60% marginal rate between £100K-£125K as personal allowance is clawed back.
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