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Income Tax Threshold Freeze Set to Cost Average Worker Almost £100 From April
Chancellor John Healey left the income tax threshold freeze in place, set to cost the average worker almost £100 from April.
Key points
- Income tax personal allowances stay frozen until 2030 under a policy set by Rachel Reeves.
- Based on a £40,911 average full-time salary and 3.5% inflation, the freeze costs £88 next tax year.
- Fiscal drag means wages rising while thresholds stay frozen push more pay into taxable bands.
Why it matters. Workers whose pay rises with inflation may pay a bigger share of their earnings in income tax while the allowance freeze continues, according to the article's account of fiscal drag.
Chancellor John Healey did not mention income tax allowances in this week's budget, keeping a freeze set by Rachel Reeves that runs to 2030. The freeze costs an average full-time worker £88 next tax year, based on a £40,911 salary and 3.5% inflation, close to the £100 council tax payment. PensionBee's Maike Currie called fiscal drag the ultimate stealth tax.
Latest updates
Income Tax Threshold Freeze Set to Cost Average Worker Almost £100 From April
The Daily Express reports that the freeze on income tax thresholds will cost the average worker almost £100 this year. Chancellor John Healey kept in place a threshold policy set by his predecessor, the paper says, and did not explicitly reference the personal tax-free allowances in his Budget speech. The freeze means that as wages rise, a growing share of earnings falls into the tax bands, and the impact starts from April. The estimate of almost £100 is the paper's figure for the average worker, and the underlying calculation was not detailed in the excerpt. Treasury figures on the wider effect of the freeze were not included in the available reporting.