Millions of UK workers could find themselves paying more income tax in the coming years — even if the Government does not officially raise the headline tax rates.
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The reason is a policy known as fiscal drag. It happens when tax thresholds stay frozen while wages rise. On paper, workers may appear to be earning more. In reality, many are simply being pulled into higher tax bands while the cost of living continues to bite.
The personal allowance remains fixed at £12,570, while the higher-rate threshold is still set at £50,270. The additional-rate threshold was cut from £150,000 to £125,140 in 2023 and has remained there.
That means ordinary pay rises can quietly push people into paying more tax — without them necessarily feeling any better off.
