The Chancellor is weighing up options for her autumn Budget
More than a million workers risk being dragged deeper into the tax net – with average bills rising by £285 a year – if Rachel Reeves decides to extending the freeze on income tax thresholds.
The Chancellor is reportedly weighing up whether to prolong the squeeze in her autumn Budget, despite having previously pledged to lift the freeze by April 2028.
The income tax threshold freeze was first imposed by Rishi Sunak as the Conservative Chancellor in March 2021.
It was originally billed as a temporary measure to help repair the public finances after Covid.
Sunak announced that both the personal allowance (the amount you can earn before paying income tax) and the higher rate threshold (the point at which you start paying 40%) would be frozen for four years, from April 2022 to April 2026.
The Chancellor is weighing up whether to prolong the squeeze in her autumn Budget (Image: Getty)
In the 2022 Autumn Statement, Chancellor Jeremy Hunt extended that freeze by a further two years – to April 2028. And there is now speculation Rachel Reeves will extend it again through to 2030.
Current thresholds (2025/26 tax year):
Personal allowance: £12,570
Basic rate (20%): £12,571 – £50,270
Higher rate (40%): £50,271 – £125,140
Additional rate (45%): above £125,140
According to House of Commons Library analysis, commissioned by the Liberal Democrats, around 1.3 million taxpayers would pay £285 more each by 2030 if the freeze is rolled over. In total, it would net the Treasury an extra £10.4billion.
London and the South East would be hardest hit. By the end of the decade, 170,000 workers in the capital would pay an average of £350 more, while 200,000 in the South East would see bills climb by £320.
The policy of freezing both the personal allowance and the higher rate threshold was first introduced by the Conservatives in 2021 under then-Chancellor Rishi Sunak, originally set to run until 2028. Ms Reeves considered prolonging the measure in her first Budget last year but dropped it, warning it would “hurt working people”.
