Chancellor Rachel Reeves has unveiled a significant 'stealth tax' move in her Budget, confirming an extension to the freeze on income tax thresholds that will now last until April 2030.
What the Budget Announcement Means
In a major update delivered on Tuesday, the 26th of November 2025, the Chancellor confirmed she is prolonging the current freeze on tax thresholds. The income tax personal allowance, which is the amount you can earn before paying tax, will remain at £12,570. This freeze was originally set to end in April 2028 but has now been extended for another two years, meaning it will be in place until the end of the 2030/31 financial year.
This policy, known as fiscal drag, was detailed in documents published by the Office for Budget Responsibility ahead of the official Budget statement. Fiscal drag occurs when tax thresholds remain static while wages rise, gradually pulling more people into higher tax brackets over time.
How the Tax Bands and National Insurance are Affected
The freeze impacts all major income tax thresholds. You will pay the basic 20% rate on earnings between £12,571 and £50,270. The higher 40% rate applies to income between £50,271 and £125,140, and the additional 45% rate hits earnings over £125,140.
Furthermore, the starting point for paying National Insurance contributions is also frozen at £12,570. You will pay 8% in National Insurance on earnings above this amount, and 2% on earnings over £50,270.
The Consequences for Millions of Workers
This extension is widely described as a stealth tax because it allows the government to increase tax revenue without officially raising tax rates. As salaries increase with inflation over the next several years, millions of workers will find themselves pushed into a higher tax band or paying tax on a larger portion of their income for the first time.
The long-term nature of this freeze, now locked in until April 2030, ensures that the effect of fiscal drag will be felt by a growing number of households across the UK, fundamentally impacting their take-home pay.
