BUDGET 2025: Tax threshold freeze extended again to 2030/31

In an unprecedented leak, the OBR has accidentally published its forecasts on the Budget early, so we know what’s happening now.

The government has extended the freeze on tax thresholds to 2030/31, according to the OBR’s document.

Tax thresholds have been frozen since 2022, meaning as wages and pensions have increased, more people have owed income tax, or had to pay it at a higher rate.

The freeze was due to end in 2028, but it has now been extended for another two years, meaning thousands more people will be dragged into higher tax brackets.

The move has been branded a ‘stealth tax’ because it forces more people to pay more tax, without the government actually ‘raising taxes’.

But millions of people have felt the impact. According to the OBR, from 2022-23 (when they were first frozen) and 2030-31, 5.2 million additional individuals will have been brought into paying income tax, 4.8 million more will have moved to the higher rate, and 600,000 more onto the additional rate.

But crucially, the people paying more tax are not better off in real terms. Wages typically rise to keep up with inflation, and tax brackets used to rise so that people were not penalised for this.

The personal allowance has slipped by almost 20% from where it would be if it was tied to CPI, while if the higher rate had kept pace with inflation, the threshold would be 39.7% higher than it now is.

Our view

Since thresholds were first frozen, millions of workers are now paying more in tax despite no change to tax rates.

This is an incredibly sneaky way for the government to raise money as it means they can avoid breaking its manifesto promise not to raise income tax, but still allows them to take a greater slice of our pay, and the millions of people who feel worse off as a result of this policy are not fooled.

It’s the ultimate stealth tax that treats the British public with contempt, and multiple studies have shown that people would rather the government just increased income tax up front instead of obtaining it through stealth methods, as it feels deceptive and undermines trust.

We’ve developed a calculator that allows people to see just how much more people would have in their pockets if the personal allowance and tax thresholds had risen in line with inflation – and it’s pretty shocking.