Chancellor Rachel Reeves presented the Spring Statement in the House of Commons today, addressing any potential significant tax adjustments. The current freeze on personal tax thresholds is expected to continue until the conclusion of the 2030/31 fiscal year, following an extension announced by the Chancellor in her Budget last November. This extended freeze is projected to lead to an increase in the number of taxpayers across different income tax bands in the 2029/30 period, as outlined by the Office for Budget Responsibility.
The ongoing freezing of tax brackets, known as fiscal drag, gradually pushes more individuals into higher tax brackets as their incomes rise. This practice is often referred to as a stealth tax, allowing the government to collect more tax revenue without explicitly raising tax rates.
During today’s Spring Statement, Rachel Reeves did not introduce any further alterations to the tax thresholds, confirming that they will continue to be frozen until the end of the 2030/31 tax year. The current personal allowance stands at £12,570, determining the threshold at which income tax obligations commence. Earnings exceeding this amount are subject to the basic 20% income tax rate, with the higher 40% rate applying to income above £50,270 and the additional 45% rate affecting earnings beyond £125,140.
Moreover, the starting point for National Insurance contributions remains at £12,570, with individuals paying 8% on income at this level and 2% on earnings surpassing £50,270.