How Much More Are You Paying Due to Frozen Thresholds?
UK income tax thresholds have been frozen since 2022. As wages rise, more of your income falls into higher bands — this is called fiscal drag.
Frequently Asked Questions
Fiscal drag (also called 'bracket creep') occurs when income tax thresholds are frozen while wages rise with inflation. Workers are pushed into higher tax bands without receiving any real pay increase.
The personal allowance (£12,570) and higher rate threshold (£50,270) have been frozen since April 2022. The freeze was extended to 2028 in the 2022 Autumn Statement.
The OBR estimates fiscal drag will raise an extra £30+ billion per year for the Treasury by 2028. Individual impacts depend on salary and pay growth.
Yes. NI thresholds were also frozen and then the Upper Earnings Limit remained at £50,270 (aligned with higher rate threshold). This compounds the fiscal drag effect.
The current freeze runs until April 2028. From 2028/29, thresholds are expected to rise with CPI inflation, though this could change with future government policy.
The personal allowance is £12,570 — unchanged since 2021/22. If it had risen with RPI since 2022, it would be approximately £14,000-£15,000.
Higher earners are also affected — the £50,270 higher rate threshold (the sum of personal allowance + basic rate band) has been frozen. Workers whose pay crosses this threshold now pay 40% on earnings that would have remained at 20%.
The additional rate threshold was reduced from £150,000 to £125,140 in April 2023. This brought more high earners into the 45% rate.
Scotland sets its own income tax rates and bands. Scottish taxpayers face different levels of fiscal drag as the Scottish Government has partially uprated its bands.
Pension contributions reduce your adjusted net income and can keep you in lower tax bands. ISA contributions, salary sacrifice arrangements, and claiming all available allowances also help.
Yes. If your salary rises with inflation but a larger proportion goes to tax due to frozen thresholds, your real (inflation-adjusted) take-home pay actually falls.
Earners between £100,000 and £125,140 face an effective 60% marginal rate as the personal allowance is withdrawn at £1 for every £2 earned over £100,000.