HEALEY KEEPS INCOME TAX THRESHOLDS FROZEN UNTIL 2031

Chancellor John Healey kept income tax thresholds frozen in his Budget, leaving the existing limits in place. He did not mention the freeze in his Budget speech. Plans introduced last year by former chancellor Rachel Reeves extend the freeze until April 2031. A published estimate puts the resulting tax take at £71bn and says 13 million workers will pay more tax.

Income tax applies to earnings from employment and self-employment, as well as rental income, savings interest and pensions. The personal allowance stands at £12,570 a year, with tax charged on income above that amount. The basic rate is 20% on income up to £50,270, while the higher rate is 40% on income between £50,270 and £125,140. Income above £125,140 attracts the additional rate of 45%. Thresholds have remained frozen since 2021 as wages have risen. Andy Burnham has previously backed ending the freeze.

Andrew Tully, technical services director at Nucleus, called the extended freeze a “stealth tax”. He said it would bring millions of people into income tax for the first time or move them into the higher-rate band. One calculation equates its effect on a basic-rate taxpayer to a 4% tax increase. Another puts the possible cost to an individual taxpayer at up to £6,500. A published inflation figure puts the rate at 3.5%.