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  "path": "/money/hmrcs-tax-threshold-freeze-fiscal-drag",
  "publishedAt": "2026-05-01T05:00:01.000Z",
  "site": "https://www.gbnews.com",
  "tags": [
    "HMRC admits MILLIONS pay higher tax due to 'unchanged' policy backed by Rachel Reeves",
    "HMRC tax refund warning as one million people miss out on £473 average payout",
    "Fuel duty revenue falls as drivers cut back on driving amid rising costs and global",
    "The GB News Editorial Charter"
  ],
  "textContent": "\n\n\nThis month marks five years since income tax thresholds were frozen at 2021 levels, with the policy now set to remain in place for a full decade.\n\nThe personal allowance has been fixed at £12,570 since April 6, 2021, while the higher rate threshold has remained at £50,270 over the same period.\n\n###\n\n\n\n\nThe measure was first introduced by former chancellor Rishi Sunak as part of the Government’s post-pandemic strategy.\n\nIt was initially due to end in 2026 before being extended to 2028 by his successor Jeremy Hunt.\n\n###\n\n\n\n\nTRENDING\n\nStories\n\nVideos\n\nYour Say\n\n###\n\n\n\n\nChancellor Rachel Reeves later confirmed a further extension at Budget 2025, pushing the freeze to April 2031.\n\nThe decision to hold thresholds steady rather than raise headline tax rates has resulted in what economists describe as fiscal drag.\n\nThis occurs when rising wages push individuals into higher tax brackets despite no formal increase in tax rates.\n\nThe policy affects millions of workers and pensioners as incomes gradually increase over time.\n\n###\n\n\n\n\n###\n\n\n\n\n###\n\n\n\n\nBasic rate taxpayers are projected to face additional costs of up to £700.36 next year as a result of the unchanged personal allowance.\n\nBy the end of the freeze in 2030 to 2031, this figure is estimated to rise to around £960, depending on wage growth and inflation.\n\nHigher rate taxpayers are expected to face significantly larger increases in their tax bills.\n\nThose paying the 40 per cent rate could contribute up to £3,500 more next year compared to a system where thresholds rise in line with inflation.\n\n### LATEST DEVELOPMENTS\n\n\n\n\n  * HMRC admits MILLIONS pay higher tax due to 'unchanged' policy backed by Rachel Reeves\n  * HMRC tax refund warning as one million people miss out on £473 average payout\n  * Fuel duty revenue falls as drivers cut back on driving amid rising costs and global\n\n\n\n###\n\n\n\n\n###\n\n\n\n\nIf allowances had increased with prices, the higher rate threshold would be approaching £70,000 by the end of the decade rather than remaining at £50,270.\n\nThe impact of fiscal drag becomes more pronounced when examining projected salary growth over time.\n\nAn individual earning £35,000 at the start of the freeze could see their salary rise to around £53,000 by 2030 to 2031 under typical wage growth assumptions.\n\nUnder an inflation-linked system, their cumulative tax bill over the period would be approximately £59,600.\n\n###\n\n\n\n\n###\n\n\n\n\nHowever, frozen thresholds are expected to increase this total by around £6,500, taking the overall tax paid to more than £66,000.\n\nThe difference is also evident when comparing tax liabilities on the same salary at different points in time.\n\nAn annual income of £35,000 currently results in an income tax bill of nearly £4,500.\n\nWith indexed allowances, this could fall to around £3,500 by the end of the decade.\n\nThe number of people affected by the freeze has risen sharply in recent years.\n\nData from HM Revenue and Customs (HMRC) shows that 5.76 million individuals were paying the higher rate in 2023 to 2024.\n\nThis represents a 50 per cent increase from 3.83 million in 2019 to 2020.\n\n###\n\n\n\n\n###\n\n\n\n\nThe figures indicate that nearly two million additional taxpayers have moved into the 40 per cent bracket over this period.\n\nHigher rate taxpayers now account for 15.7 per cent of all taxpayers, up from 12.2 per cent five years earlier.\n\nForecasts from the Office for Budget Responsibility (OBR) suggest the trend will continue.\n\nBy 2030 to 2031, the watchdog expects the freeze to result in a further 4.8 million people paying the higher rate.\n\nMore than 6 million additional individuals are also projected to be brought into the income tax system altogether.\n\n###\n\n\n\n\n\n\n\n\n\n\n**Our Standards: The GB News Editorial Charter**",
  "title": "HMRC's £700 income tax grab — how fiscal drag is costing workers thousands"
}