Daily briefing

Frozen Tax Bands Are Costing You £642 More This Year

Since 2021 the government has frozen income tax thresholds while wages and prices have risen — a policy economists call fiscal drag. As your salary increases with inflation, more of it falls into higher tax bands without any headline rate rise.

By 2027, the Office for Budget Responsibility estimates this freeze will drag an additional 3.2 million people into the higher-rate tax band. For the average household earning £39,000, that translates to roughly £642 more in income tax this year alone.

This is stealth taxation by design: no Budget announcement, no vote on a new rate — just thresholds that stay still while earnings move. Over a decade, a typical worker can lose thousands compared with thresholds that rose with inflation.