Chancellor Rachel Reeves presented the Spring Statement in the House of Commons today, without any significant tax changes announced. The freezing of personal tax thresholds will continue until the end of the 2030/31 financial year, initially planned to be unfrozen in April 2028 but extended by three years in the Chancellor’s previous Budget announcement.
The Office for Budget Responsibility projected that the freeze would lead to an increase in the number of basic-rate, higher-rate, and additional-rate income tax payers in the upcoming years.
The concept of freezing tax brackets, known as fiscal drag, gradually pushes individuals into higher tax brackets as their incomes rise. This approach is often referred to as a stealth tax, enabling the government to collect more tax without overtly increasing tax rates.
In the Spring Statement, Rachel Reeves did not introduce any further alterations to the tax thresholds, indicating that the freeze will persist until the end of the 2030/31 tax year. The current personal allowance stands at £12,570, with a 20% basic income tax rate applied to earnings exceeding this amount.
Individuals face a 40% rate on earnings above £50,270 and a 45% rate on income surpassing £125,140. The National Insurance threshold is also set at £12,570, with an 8% contribution rate on earnings starting at this level and a 2% rate on incomes exceeding £50,270.
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