{"id":128419,"date":"2026-11-08T11:20:00","date_gmt":"2026-11-08T11:20:00","guid":{"rendered":"https:\/\/en.econostrum.info\/uk\/?p=128419"},"modified":"2026-11-08T09:49:43","modified_gmt":"2026-11-08T09:49:43","slug":"your-income-could-take-an-88-hit","status":"publish","type":"post","link":"https:\/\/en.econostrum.info\/uk\/your-income-could-take-an-88-hit\/","title":{"rendered":"Your Income Could Take an \u00a388 Hit As Labour Keeps a Little-Mentioned Tax Policy in Place"},"content":{"rendered":"\n

The freeze, originally introduced in 2021 and subsequently extended by former Chancellor Rachel Reeves<\/strong>, means that more earnings become taxable as wages rise. Although income tax rates remain unchanged, the proportion of income subject to taxation has increased, a process commonly known as fiscal drag.<\/p>\n\n\n\n

Why the Frozen Personal Allowance Will Cost Workers \u00a388<\/strong><\/h2>\n\n\n\n

According to the Coventry Telegraph<\/a>, the Government’s decision to retain the existing income tax thresholds means that someone earning the average full-time salary of \u00a340,911 will pay \u00a388 more in the next tax year than if those thresholds had risen in line with the current inflation rate of 3.5%.<\/p>\n\n\n\n

The additional tax is slightly below the \u00a3100 payment that households in council tax <\/strong>bands A to D are set to receive this winter. Unlike that payment, the effects of the frozen allowance will continue as long as the thresholds remain unchanged.<\/p>\n\n\n\n

The personal allowance, which determines how much income people can earn before paying income tax, has remained at \u00a312,570 since April 2021. The threshold was established under then Chancellor Rishi Sunak and is now due to remain in place until 2030.<\/p>\n\n\n\n

Freezing tax allowances is not an entirely new approach. Previous Chancellors have occasionally maintained thresholds at the same level rather than adjusting them annually.<\/p>\n\n\n\n

In the early 1990s, Kenneth Clarke<\/strong> kept the personal allowance at \u00a33,445 between 1992 and 1995. The current arrangement, though, represents a considerably longer period without an adjustment.<\/p>\n\n\n\n

For the Treasury, unchanged thresholds have helped increase tax revenues. For employees <\/strong>whose wages rise, the result is a growing share of their earnings becoming liable for income<\/a> tax, even when their pay increases reflect inflation.<\/p>\n\n\n\n

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In England, Wales and Northern Ireland, earnings between \u00a3100k and \u00a3125,140 (~ $135k\u2013$169k) face an effective marginal income-tax rate of 60%, or 62% including employee National Insurance (NI), because the personal allowance is withdrawn. Above that, the marginal rate drops to\u2026 https:\/\/t.co\/8nkgmghHxs<\/a><\/p>— \u00dej\u00f3\u00f0ar (@todarku) November 7, 2026<\/a><\/blockquote>