The personal tax thresholds are currently frozen until the end of the 2030/31 financial year – but did the Chancellor announce any changes to this today?
Chancellor Rachel Reeves leaving to deliver her Spring Statement(Image: PA)
Chancellor Rachel Reeves delivered her Spring Statement in the House of Commons this afternoon – but did she announce any major tax changes?
The personal tax thresholds are currently frozen until the end of the 2030/31 financial year.
They were meant to be unfrozen in April 2028 – but the Chancellor announced in her Budget last November that she was extending this by another three years.
At the time of this announcement, the Office for Budget Responsibility released figures saying the freeze would result in 780,000 more basic-rate, 920,000 more higher-rate and 4,000 more additional-rate income tax payers in 2029/30.
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The freezing of tax brackets is known as fiscal drag, as more people are dragged into higher tax brackets over time when their wages increase.
It is also described as a stealth tax, as it is a way for the government to collect more tax without actually putting up the rate of tax that people are paying.
But in her Spring Statement today, no further changes to the tax thresholds were announced by Rachel Reeves. This means they are currently still set to remain frozen until the end of the 2030/31 tax year.
The personal allowance is how much most people can earn before they start to pay tax. This is currently set at £12,570. When you earn above this amount, you pay the basic 20% rate of income tax.
The higher 40% rate applies on earnings above £50,270, while the additional 45% rate kicks in when you start to earn more than £125,140.
The threshold for when you start paying National Insurance is also set at £12,570. You pay 8% in National Insurance contributions when you start to earn £12,570, then 2% on earnings over £50,270.
Income tax thresholds explained
- Personal allowance – up to £12,570
- Basic rate (taxed at 20%) – £12,571 to £50,270
- Higher rate (taxed at 40%) – £50,271 to £125,140
- Additional rate (taxed at 45%) – over £125,140
