The Tax Rise Nobody Voted On
Income tax rates haven't changed. But the thresholds that decide how much of your income gets taxed have been frozen since 2021/22, and will stay frozen until at least April 2031. As wages rise with inflation, more and more of everyone's income falls into tax — without a single headline rate ever moving. This is fiscal drag, sometimes called a "stealth tax."
All of these have been frozen since 2021/22 and are confirmed frozen until at least April 2031. National Insurance thresholds are frozen on the same timetable.
Work out your own fiscal drag
Enter a salary and see the real breakdown, plus a rough estimate of how much extra tax comes purely from the threshold freeze.
Estimate only. England/Wales/Northern Ireland rates; excludes Scottish income tax, student loan repayments, pension contributions, and other allowances. Not financial advice.
What it actually costs, by earner
Six real worked examples, using the actual 2026/27 tax bands above.
- Personal Allowance: £12,570 tax-free
- Taxable income: £9,430
- Income tax at 20%: £1,886
- National Insurance at 8%: £754.40
- Take-home: £19,359.60
- Personal Allowance: £12,570 tax-free
- Taxable income: £27,430, all in the 20% basic rate band
- A 3% pay rise adds £1,200 gross...
- ...but only about £864 actually reaches your pay packet
- The rest (£336) goes straight to income tax and National Insurance
- Between £100,000 and £125,140, the Personal Allowance is withdrawn — £1 lost for every £2 earned
- At £110,000, the tax-free allowance has shrunk from £12,570 to £7,570
- Combined with 40% higher-rate tax, this creates an effective marginal rate of around 60%
- On the next £1,000 earned in this band, roughly £600 goes to tax and lost allowance — not the ~40% you’d expect
- The full new State Pension for 2026/27 is £241.30/week — £12,547.60/year
- The Personal Allowance is £12,570
- The gap between them: just £22.40
- Any private pension, savings interest, or part-time income above that £22.40 is taxed at 20%
- The High Income Child Benefit Charge starts clawing back Child Benefit once either partner’s adjusted net income passes £60,000
- It’s fully clawed back by £80,000 — at £65,000, this couple is already losing a quarter of their Child Benefit
- The £60,000 and £80,000 figures are fixed cash amounts, not linked to inflation or wage growth
- A couple earning £58,000 combined (both under £60k individually) keeps their Child Benefit in full — the charge only looks at the highest individual earner, not household income
- Plan 5 student loan repayment threshold: £25,000/year
- Repayments: 9% of everything earned above that threshold
- On £32,000: 9% of £7,000 = £630/year in loan repayments
- Stacked on top of 20% income tax and 8% National Insurance, this graduate loses 37p of every extra £1 earned above £25,000
It's not just income tax
Several other thresholds across the tax system are frozen too — some for far longer than income tax has been.
Frozen since 2009 — 17 years and counting, by far the longest freeze of any major UK threshold, spanning five Prime Ministers. Frozen until at least April 2031.
On top of the main nil-rate band when a home passes to direct descendants, giving up to £500,000 tax-free per person. Also frozen until April 2031.
Cut from £2,000 to £1,000 in 2023/24, then halved again to £500 in 2024/25 — moving in the opposite direction from most frozen thresholds.
Unchanged for years, while savings rates have risen — meaning more savers now pay tax on interest that used to sit comfortably inside the allowance.
The point at which a small business must start charging VAT. As turnover rises with inflation, more small businesses cross this line each year.
Full Child Benefit is clawed back on a sliding scale between these two fixed income figures — see the dual-income couple example above.
How much has been lost to the freeze?
The Personal Allowance has sat at £12,570 since the 2021/22 tax year — a full decade of being frozen by the time the freeze finally ends in April 2031. Over that period, UK prices have risen by more than 20%, according to ONS data.
Had the Personal Allowance simply kept pace with inflation instead of being frozen, it would likely sit somewhere in the region of £15,000–£15,700 today, rather than £12,570 — this is a rough estimate for illustration, not an official government figure. The gap between those numbers is, in effect, the size of the stealth tax rise every basic-rate taxpayer has absorbed since 2021.
The Inheritance Tax nil-rate band tells an even starker story: frozen at £325,000 since 2009, meaning it has now gone unchanged for longer than most people's entire working career, while average house prices — the single biggest driver of estates crossing the IHT threshold — have risen dramatically over the same period.
In the news
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