Frozen Tax Thresholds Until 2028: How the Stealth Tax Will Hit Your Pay

Chancellor Jeremy Hunt has extended the freeze on income tax thresholds for an additional three years, meaning the personal allowance and higher rate threshold will remain at £12,570 and £50,270 respectively until April 2028. This policy, originally introduced in 2021, will now span seven years, dragging millions more workers into paying tax or into higher tax brackets as wages rise with inflation—a phenomenon known as fiscal drag. The Office for Budget Responsibility estimates that by 2027-28, the freeze will bring in an extra £29.3 billion annually compared to if thresholds had risen with inflation. For individuals, this means someone earning £30,000 today could pay over £1,000 more in tax per year by 2028, while a £60,000 earner could see an additional £2,600 in taxes. The freeze effectively acts as a stealth tax, reducing take-home pay without headline rate increases. Critics argue the measure disproportionately affects middle-income earners, as the higher rate threshold freeze pulls more people into the 40% band. With inflation forecast to remain elevated, the number of higher-rate taxpayers is expected to rise by 2.7 million by 2027-28. This comes amid a broader cost-of-living squeeze, making the freeze a key issue for household budgets. As fiscal drag quietly reshapes the tax landscape, workers may need to plan for a shrinking real income. The question is whether future governments will unfreeze thresholds—or make the stealth tax permanent.