The one thing the chancellor didn't mention that will affect your pay
Summary
UK income tax thresholds, frozen since 2021, are expected to rise with inflation after 2031, according to documents from the Office for Budget Responsibility. Until then, pay rises can push more income into taxable or higher-rate bands, increasing tax bills; the article says a separate allowance will protect people whose only income is the state pension.Key Facts
- The personal allowance remains £12,570, and income above it is generally subject to income tax.
- The higher-rate threshold is £50,271, while the additional 45% rate applies to income above £125,140.
- Frozen thresholds mean that as wages rise, more income may become taxable or fall into a higher tax band.
- The OBR documents say personal and other tax thresholds are scheduled to rise with inflation after 2031.
- The government’s official forecaster estimates that almost one in four taxpayers will pay some income tax at the higher rate by 2031.
- The Institute for Fiscal Studies estimates that more than six million additional people will be brought into income tax by 2031 because of the frozen personal allowance.
- A new separate Pension Tax Allowance is intended to prevent people whose only income is the state pension from paying tax on it.
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