freezing thresholds
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The Big Freeze Continues: More Taxpayers, More Pressure, More Planning Needed

One of the most far-reaching tax policies in recent years hasn’t been about raising rates—it’s been about freezing thresholds. And new data from the Office for Budget Responsibility (OBR) shows just how much this quiet change is costing taxpayers.

📊 A Growing Tax Burden

Between 2010/11 and 2019/20, the UK’s total tax take (as a percentage of GDP) remained relatively steady at around 33.2%. But following the pandemic’s financial demands, and under successive governments, this number has begun to climb. It’s forecast to hit:

  • 36.8% in 2025/26

  • 37.7% in 2027/28—a historic peak.

This rise is driven largely by income tax and National Insurance Contributions (NICs), not new tax hikes, but through the ongoing freeze of personal tax thresholds—a policy now confirmed to continue under the current Labour Government until at least April 2028.

📉 Thresholds vs. Inflation

The current thresholds have been frozen since April 2021:

  • Personal Allowance (PA): £12,570

  • Higher-rate threshold: £50,270

If these had been adjusted for inflation, the OBR says that by 2025/26:

  • The Personal Allowance would be £15,480

  • The Higher-rate threshold would be £62,080

The result? By not adjusting for inflation, the Treasury expects to raise an additional £26.8 billion in tax revenue in 2025/26 alone.

👥 Who’s Affected?

The freeze is pushing more people into tax—and more into higher-rate tax—each year. For 2025/26, the OBR estimates:

  • 3.4 million additional individuals will be pulled into paying income tax

  • 2.8 million more will start paying at the 40% rate

And as more taxpayers move into higher brackets—without actually becoming wealthier in real terms—it increases the burden on both taxpayers and HMRC’s already-stretched services.

🧾 What Should You Do?

If you’re:

  • New to paying tax due to a pay rise or new income stream

  • New to the 40% bracket

  • Or unsure whether your tax affairs are fully compliant…

…this is the time to get professional advice. With thresholds frozen and pressure on HMRC growing, errors and oversights could result in penalties, delays, or budget shortfalls.

At Merranti, we can help you:

  • Confirm if you need to file a tax return (even if you’re PAYE)

  • Calculate what you’ll owe, and when

  • Plan ahead so there are no surprises come January or July

🧠 Final Thought: Frozen Today, Expensive Tomorrow

The tax threshold freeze may feel like a background issue—but it has very real and growing effects. Even modest pay increases can now trigger tax consequences, including the need to self-assess or budget for higher-rate liabilities.

📞 If you think you might be affected—or simply want peace of mind—speak to us today at Merranti Accounting. We’re here to help.

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