Chancellor Rachel Reeves presented the Spring Statement in the House of Commons today, focusing on potential tax adjustments. Currently, personal tax thresholds are on freeze until the conclusion of the 2030/31 financial year. Originally planned to be unfrozen by April 2028, the Chancellor extended this freeze by an additional three years during her Budget announcement last November.
Following this decision, the Office for Budget Responsibility forecasted an increase in the number of taxpayers in different income tax brackets for the 2029/30 period. The freeze on tax brackets, termed fiscal drag, leads to more individuals moving into higher tax brackets over time as their incomes rise. This strategy, often described as a stealth tax, allows the government to collect more taxes without raising the actual tax rates.
In the latest Spring Statement, Rachel Reeves did not introduce any further changes to the tax thresholds, confirming that they will continue to be frozen until the end of the 2030/31 tax year. The personal allowance, currently set at £12,570, signifies the income threshold before tax obligations commence. Earnings above this amount are subject to the basic 20% income tax rate, with the higher 40% rate applicable to earnings exceeding £50,270. Furthermore, the 45% additional rate applies to incomes surpassing £125,140.
The National Insurance payment threshold is also at £12,570, with an 8% contribution on earnings at this level and a 2% rate on income above £50,270. Reeves’ Spring Statement did not alter these thresholds, maintaining the current freeze until the specified tax year end.
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