Frozen tax thresholds in the UK: more people to pay higher tax by 2031

Taxpayers in the UK may pay more and more income tax even though the rates themselves are not changing. The reason is the freeze on tax thresholds, which, through a mechanism known as "fiscal drag", pushes people into higher bands after pay rises.

How fiscal drag works

When the personal allowance and thresholds do not rise with inflation and wages, more people start paying tax or move into a higher rate. A pay rise therefore does not always mean a proportionally higher take-home pay.

The higher rate applies only to the part of income above the threshold. For example, the 40% rate covers the amount over the statutory threshold, not the whole salary.

How long the freeze lasts

The freeze on some thresholds was announced in 2021 by the then chancellor, Rishi Sunak. It was due to last until 2026 and was later extended to 2028. In the November 2025 budget the government extended it to April 2031. It covers the basic income tax thresholds and selected National Insurance thresholds.

In practice this means that:

• the personal allowance stays at £12,570,
• the higher-rate threshold stays at £50,270,
• the threshold for the top 45% rate stays at £125,140.

For comparison, in the 2010/11 tax year the personal allowance was £6,475, and in 2018/19 it was £11,850. According to the authors of the source, had it kept rising as before, it could today be around £18,000–£19,000, and by 2031 as much as around £24,000. This is the publication's estimate, not official data.

The scale of the effect

According to the November 2025 forecast from the Office for Budget Responsibility (OBR), freezing thresholds until 2030/31 means an additional 5.2 million people will start paying income tax, compared with a scenario in which thresholds rise with inflation. Another 4.8 million will move into higher bands.

The OBR estimates that the combined effect of freezing allowances and thresholds will bring in about £67 billion for the budget in the 2030/31 tax year. The freeze on income tax thresholds alone accounts for more than £55 billion.

The Financial Times says that by 2031 almost 11 million people will pay tax at the higher or additional rate. In 2021 there were about 4.4 million. This is where the "11 million" in headlines comes from: it does not mean all workers will pay more.

What this means for you

The rules apply to everyone who pays income tax in the UK, whether employed or self-employed. If your pay keeps rising while thresholds stay put, part of your income may be taxed at a higher rate. People who currently earn below the personal allowance may start paying tax after a pay rise.

The freeze also covers selected National Insurance thresholds. However, the source does not say exactly who will be affected or to what extent.