Rachel Reeves’ decision to freeze income tax and national insurance thresholds until 2031 will leave workers worse off, while pensioners and benefit recipients see real-terms gains, according to a new analysis by the Centre for Policy Studies (CPS).
The analysis found that an employee currently earning £50,000 would be £505 worse off in real terms by 2030-31, despite a forecast salary increase of over £6,000. In contrast, pensioners would be at least £306 better off, thanks to the triple lock, and those on standard universal credit would gain £290 due to inflation-linked increases.
Daniel Herring, CPS head of economic and fiscal policy, said Labour’s tax policy was “quietly hammering workers while protecting pensioners and benefit recipients”. He added that freezing the personal allowance would drag millions into higher tax bands, with a worker on £50,000 today set to be poorer in five years’ time despite pay rises.
The Treasury defended the Budget, highlighting increases to the national living wage, a £150 cut to energy bills, and freezes on prescription fees, fuel duty, and rail fares. A spokesperson said the decisions were “fair and necessary” to deliver on priorities such as cutting waiting lists, debt, and the cost of living.
The tax threshold freeze is expected to raise around £23bn for the Exchequer by 2030-31.
