Millions of British workers face a growing income tax burden after Chancellor John Healey's first Budget left income tax thresholds frozen until April 2031. The Government kept its promise not to raise the headline rates of income tax, National Insurance or VAT, but the freeze means pay rises can still push workers into higher tax bills, even when those rises only keep pace with prices.

What stays frozen, and why it matters

The personal allowance stays at £12,570, while the higher-rate threshold in England, Wales and Northern Ireland remains at £50,270. A worker earning £49,000 sits below that higher-rate line, but a rise to £51,000 would see the slice above £50,270 taxed at 40 per cent rather than 20 per cent. Lower earners can also be drawn into tax for the first time as wages pass £12,570. The freeze dates from Rishi Sunak's chancellorship and was extended to April 2031 by Rachel Reeves in November 2025; Healey's Budget leaves it unchanged.

The Office for Budget Responsibility forecasts that the overall UK tax burden will reach 38.6 per cent of GDP by 2031-32, a historically high level. Its analysis also suggests the combined income tax and National Insurance freezes between 2022-23 and 2030-31 could reduce labour supply by the equivalent of 215,000 workers at average hours, a modelled effect on hours worked, not a forecast of redundancies. A new Pension Tax Allowance is planned to shield pensioners whose income does not exceed the full new State Pension from small tax bills caused by the frozen allowance.

For households, the practical question is how much of any future pay rise actually reaches a bank account. Readers should check HMRC guidance or a qualified adviser for their own position, and note that thresholds and rates can change in future Budgets.

Sources: Londoner News, Resolution Foundation.