UK Income Tax Thresholds Remain Frozen Until 2031 in Autumn Budget

Chancellor John Healey’s latest Budget confirms that personal tax bands will remain locked at their current cash levels until 2031, continuing a multi-year freeze first introduced in 2021. According to official documents from the Office for Budget Responsibility (OBR), the ongoing freeze will pull an estimated 6.8 million additional earners into paying income tax and create 5.4 million more higher-rate taxpayers across the country.

How Fiscal Drag Is Depleting Household Take-Home Pay

Rather than announcing an outright increase to headline rates, successive governments have relied on fiscal drag. As nominal salaries rise to offset inflation, workers find a steadily larger proportion of their earnings crossing tax boundaries that have not adjusted since 2021. The OBR projects that this policy will raise £58bn annually by the 2030-31 tax year.

• Personal Allowance: Remains held at £12,570, after which earnings are taxed at the basic rate of 20%.
• Higher Rate Band: Remains anchored at £50,271, where income is taxed at 40%. The OBR forecasts nearly one in four taxpayers will pay higher-rate tax by 2031, up from 15% in 2021-22.
• Additional Rate Threshold: Fixed at £125,140, above which earnings incur a 45% levy, with the personal allowance tapering away completely between £100,000 and £125,140.
• Pension Protection: A dedicated Pension Tax Allowance will prevent basic state pensioners from paying income tax when payments increase to £13,036 next April.

What Consumers Should Do Next

With tax brackets scheduled to remain static for another four years before inflation uprating returns in 2031, employees receiving cost-of-living pay rises should carefully audit their net returns. Calculate whether pay uplifts will push portions of your earnings into higher tax or national insurance liabilities. Reviewing employer benefit schemes, such as cycle-to-work programmes or ultra-low emission vehicle leasing, can lower gross salary before tax calculations apply, helping households safeguard their take-home income against stealth taxation.