UK Income Tax Thresholds Stay Frozen Until April 2031

London, United Kingdom — Income tax thresholds will remain frozen at current levels until April 2031, the government confirmed, extending a policy that has already reduced take-home pay for millions of workers over the past five years, the BBC reported.

Chancellor John Healey did not address the freeze directly in his Budget speech, but documents published by the UK's Office for Budget Responsibility (OBR) show the policy is scheduled to continue on its existing timeline before thresholds resume rising with inflation after 2031, according to the BBC.

Why does freezing thresholds raise revenue without raising rates?

The personal allowance — the point at which workers start paying income tax — and the thresholds for higher tax bands have been held at 2021 levels rather than rising each year with the cost of living. As wages increase, a larger share of pay moves above those fixed thresholds, pulling more income into taxable bands without any change to headline tax rates, the BBC noted. Because the mechanism does not appear directly on a payslip as a new tax, it is often described as a stealth tax, a practice used by chancellors since Rishi Sunak to help fund defence, the NHS, schools, and support for the sick, disabled and elderly, per the BBC.

How much extra revenue does the freeze generate?

The amount raised through frozen thresholds has climbed each year and is projected to reach £58 billion by 2030-31, a sum the BBC said is larger than current UK government spending on transport and close to current defence spending.

How many more people will start paying tax?

Only those earning under £12,570, the personal allowance threshold, pay no income tax at all. By 2031, the OBR calculates that an extra 6.8 million people will be paying income tax who would not have been drawn in had the personal allowance risen with inflation instead of staying frozen, the BBC reported.

What protection is being offered to pensioners?

The state pension sits just below the personal allowance threshold, and pensioners had been expected to start paying tax once the basic state pension rises to £13,036 next April. To prevent that, the chancellor is introducing a separate Pension Tax Allowance that will keep low-income pensioners — those with income up to the value of the full new state pension — exempt from income tax, according to the BBC. The personal allowance threshold applies across the UK, meaning pensioners and workers in Scotland are also affected, though other Scottish tax bands differ, the BBC noted. National Insurance contributions are levied using the same thresholds.

What happens when the freeze ends in 2031?

After April 2031, thresholds are expected to begin rising with inflation again, according to the OBR documents cited by the BBC, which would mean workers keep a larger share of future pay increases rather than seeing more of each raise taxed away.

What to watch

• Whether the Pension Tax Allowance shields all low-income pensioners once the state pension rises next April.
• Whether Scotland's separate tax bands shift the impact of the frozen UK-wide personal allowance.
• Whether future Budgets extend the freeze again before April 2031, as previous chancellors have done.

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