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Get startedIncome tax band freeze extended by three years
Find out how today's budget announcement will impact your finances
Chancellor Rachel Reeves has confirmed in the Autumn Budget that income tax thresholds will remain frozen, reversing last year’s plan to increase them in line with inflation from 2028.
The three-year extension means more workers are likely to move into higher tax bands as earnings rise. According to statistics published by the Office of Budget Responsibility (OBR), more than 1.7million people will be dragged into paying or paying a higher rate.
The move will raise an extra £8.3bn for the Treasury in 2029-30.
Here, Which? sets out what the threshold freeze could mean for your income and outlines the other tax changes announced in the 2025 Autumn Budget.
What big tax changes did Reeves reveal?
In the run-up to the Budget, there was talk of a possible 2p rise in the basic rate of income tax offset by an equivalent cut to NI. In the end, these options were set aside, and Reeves confirmed a further freeze to income tax thresholds.
The former Conservative government froze income tax thresholds in 2021-22 and planned to keep them at the same levels until 2028.
In the Autumn Budget 2024, Reeves said she would end that approach from 2028 and allow thresholds to rise with inflation instead. However, ahead of her statement in Parliament today, Reeves said she would 'take the fair and necessary choices to deliver on our promise of change'.
She added: 'I will not return Britain back to austerity, nor will I lose control of public spending with reckless borrowing.'
- Find out more: All the key points from the Autumn Budget 2025
Tax bands 2025-26 until 2031
England, Northern Ireland and Wales all have the same income tax rates, which are set by the British government.
While Scotland's income tax bands are set by the Scottish government, so Westminster budget announcements on income tax do not affect workers in Scotland, unless it is a change in the ‘personal allowance’, which Scotland cannot change. The Scottish budget will take place on 13 January 2026.
Today's freeze will mean income tax brackets will remain at the following levels in England, Wales and Northern Ireland until 2031:
| Band | Tax rate | Thresholds (2025-26) | Thresholds (2026-31) |
|---|---|---|---|
| Personal allowance | 0% | Up to £12,570 | Up to £12,570 |
| Basic rate | 20% | From £12,571 up to £50,270 | From £12,571 up to £50,270 |
| Higher rate | 40% | From £50,271 up to £125,140 | From £50,271 up to £125,140 |
| Additional rate* | 45% | Over £125,140 | Over £125,140 |
* In England, Wales and Northern Ireland, for those earning above £100,000, the personal allowance goes down by £1 for every £2 of income, and can go down to zero, so a person can end up paying income tax on all of their income.
- Find out more: income tax calculator
What frozen thresholds mean for your money
Frozen income tax thresholds are often described as a stealth tax because they increase the amount you pay without any rise in headline tax rates.
This happens through fiscal drag, where tax bands such as the personal allowance (£12,570) and the higher-rate threshold (£50,270) stay fixed rather than rising with inflation.
As wages increase over time, more of your income becomes taxable and some earners are pushed into higher tax bands. The result is lower take-home pay even when salaries are rising.
According to the OBR, keeping thresholds frozen will create a further 780,000 basic-rate taxpayers, 920,000 more higher-rate taxpayers and 4,000 additional-rate taxpayers by 2029-30.
Since the freeze first began, the OBR estimates that 5.2 million more workers will have been brought into paying income tax, 4.8 million more into the higher rate and 600,000 more into the additional rate.
This means the share of taxpayers paying the higher or additional rate is set to rise from 15% in 2021-22 to 24% in 2030-31.
- Find out more: income tax rates and thresholds
How much more will you pay?
Quilter's analysis shows that for someone earning £44,000 today, extending the freeze increases their tax bill by £843 over the next four years to 2030.
For a worker earning £40,000 today, the freeze adds £321 over the period to 2030.
According to the OBR report, published before the Budget, households' disposable income per person is projected to fall from 3% in 2024-25 to around 0.25% a year over the forecast.
Real household income is the amount of money each person in the UK has to spend, adjusted for inflation. This is a downgrade on the OBR's previous forecast in March and is 'well below the last decade's average growth of 1% a year'.
- Find out more:tax reliefs – how to reduce your tax bill
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What other tax changes were announced?
Here's everything else that was announced relating to tax and your income:
Confirmed wage rises from 2026
Before the official Budget on Wednesday, the Treasury confirmed that both the minimum and national living wage would rise from April 2026.
The national living wage for those over 21 years old will rise by 50p an hour to £12.71. The biggest rise will be seen for those aged 18-20 years old at 85p.
The government says this marks further progress towards its goal of phasing out 18-20 wage bands and establishing a single adult rate. The apprentice rate and for those under 18 will rise by 45p an hour to £8.
The government said around 2.7million people would benefit from the rise overall. However, this move will push more workers past the personal allowance threshold, meaning more workers become income taxpayers.
- Find out more: emergency tax codes
National Insurance rates frozen
National Insurance Contribution (NICs) levels will also be frozen for both for taxpayers and employers, with rates set to also remain at their current levels until 2031. The move will raise an extra £13bn a year by 2030.
The employer's threshold was reduced from £9,100 to £5,000 as part of a huge shake-up last year.
- Find out more: national Insurance rates and contributions
State pension changes for those living abroad
From April 2026, the government will abolish voluntary Class 2 Voluntary National Insurance contributions (VNICs) for self-employed people living or working abroad.
Class 2 contributions are used to help build up your NI record to qualify for the new state pension when you reach the state pension age.
Those living abroad will also need at least 10 years of UK residency or contributions to be able to pay for voluntary contributions. Previously, this requirement was three years of residency in the UK or contributions paid consecutively.
The government said it was launching a wider review of voluntary NICs, with a call for evidence set to be published in the new year.
- Find out more: your state pension forecast explained
Basic new state pension simple assessment
To simplify the tax process and reduce administrative hassle, the government will stop requiring pensioners whose sole income is the state pension to pay small tax amounts through simple assessment.
Simple assessment is used by HMRC to collect small tax underpayments from people with straightforward finances, allowing them to avoid filing a full self-assessment tax return.
The plan is to introduce the measures from the 2027-28 tax year, and will provide more details on how they will do this next year.
