Left Hand Right Hand - Despite National Insurance Cut You Will Still Pay More Tax Due To Personal Allowances Frozen

7th March 2024

Millions of people will pay hundreds of pounds more in tax because of changes to the tax thresholds. These are the income levels at which people start paying income tax, or have to pay higher rates.

These used to rise every year in line with inflation.

However the tax-free personal allowance - the amount you can earn every year before you have to pay income tax - has been frozen at £12,570 until 2028. Higher-rate tax will continue to kick in for earnings above £50,270.

Freezing the thresholds means that more people start paying tax and NI as their wages increase, and more people pay higher rates.

It will create 3.2 million extra taxpayers by 2028, and 2.6 million more people will pay higher rates, according to the Office for Budget Responsibility (OBR), which independently assesses the government's economic plans.

The OBR expects the government to raise £25.5bn more a year by 2027-28 than if NI and income-tax thresholds had gone up in line with inflation.

According to the IFS, by 2027-28 an employee earning £35,000 "will be paying about £440 a year more in direct tax overall as a result of all the changes to income tax and NI since 2021".