Chancellor Rachel Reeves presented the Spring Statement in the House of Commons today. There were no new tax adjustments mentioned during her speech. The freeze on personal tax thresholds is extended until the conclusion of the 2030/31 fiscal year. This decision was initially scheduled to be lifted in April 2028 but was prolonged for an additional three years as declared in the Budget last November.
The Office for Budget Responsibility estimated that the prolonged freeze would lead to an increase in the number of taxpayers across various income tax brackets in 2029/30. This strategy, known as fiscal drag, gradually pushes more individuals into higher tax brackets over time as their earnings increase. It is also referred to as a stealth tax, allowing the government to collect more revenue without directly raising the tax rates.
In the Spring Statement, Rachel Reeves did not introduce any further modifications to the tax thresholds. Hence, the freeze will persist until the end of the 2030/31 tax year. The current personal allowance stands at £12,570, beyond which individuals are subject to the basic 20% income tax rate. Earnings exceeding £50,270 trigger the higher 40% rate, while the additional 45% rate applies when income surpasses £125,140.
The threshold for commencing National Insurance contributions is also set at £12,570. Initially, an 8% contribution is required on earnings at this level, followed by a 2% rate on income exceeding £50,270.