Analysis claims millions earning around £50,000 will see their take-home pay fall – but others are set to benefit
Millions of pensioners and families on benefits are set to see their incomes rise over the next decade, thanks to protections in Rachel Reeves’s tax plans, analysis shows. The “triple lock” on the state pension is set to leave millions £306 a year better off by 2031, while some pensioners could gain up to £537 a year under additional protections dubbed a “quadruple lock.”
Those relying solely on the state pension are set to be fully exempt from income tax, even as the payments rise above the tax-free allowance next year. Recipients of universal credit are also set to benefit. Standard-rate claimants are set to see their payments rise by £290 a year by 2031, with higher increases for those receiving additional benefits, all linked to inflation.
But while pensioners and benefit claimants are set to see a boost, millions of middle earners face a squeeze. Workers earning around £50,000 could see their post-tax pay fall from £39,520 to £39,014 over the next five years – a real-terms loss of more than £500.
Around seven million people earn above £50,000, including over a million in London, meaning many professional households are set to feel the pinch. The problem stems from the continued freeze on income tax thresholds, first introduced by the Conservatives in 2021‑22 and extended to 2028, and now set to run until 2031.
The higher-rate threshold – where 40% tax starts – has been stuck at £50,270 since 2022. If it had risen with inflation, it would now be over £62,000.
The Office for Budget Responsibility predicts that by 2030, an extra 4.2 million people will pay income tax, with 3.5 million dragged into higher or additional-rate bands. Nurses, electricians, and primary school teachers are on course to breach the higher-rate threshold by 2031, while secondary school teachers, police officers, and London’s average earners could be affected as soon as next year.
Daniel Herring, head of economic and fiscal policy at the CPS, said: “Labour’s tax policy is quietly hammering workers while protecting pensioners and benefit recipients. Freezing the personal allowance for income tax will hit everyone, but it’s those who are dragged into higher tax bands who will really suffer – to the point where a worker on £50,000 today is set to actually be poorer in five years’ time, despite getting pay rises.
“Meanwhile, the state pension and universal credit will both be worth more in real terms. This is fiscal drag in action, raising taxes for millions of workers through the back door.”
A Treasury spokesman pointed to measures that will help families, saying: “In the budget we increased the national living wage and national minimum wage and took £150 off people’s energy bills, extended the freeze on prescription fees [and] fuel duty and froze rail fares for the first time in 30 years.
“The fair and necessary decisions we made at the budget mean we can deliver on the country’s priorities – cut waiting lists, cut debt and borrowing and cut the cost of living.”
Downing Street is preparing a push to highlight the winners, with Sir Keir Starmer planning a series of interventions to stress “government action so far, including an economic approach which has seen six interest rate cuts and inflation starting to fall.”
The PM told the Daily Mirror he is launching an “all-out war on the cost of living,” while his chief of staff Morgan McSweeney has described 2026 as the “year of proof,” when voters are expected to feel the effect of the government’s policies.
