How Frozen Tax Allowances Affect Ordinary People Especially Low paid and part-time workers

25th November 2025

The personal tax allowance (currently £12,570) is frozen.

Normally, this allowance used to rise with inflation or wage growth. There is lot of speculation the chancellor will extend the freeze until 2029/30.

Because it's stuck, more people are being pulled into paying tax as wages creep up — even if they’re only keeping pace with rising costs.

This is called fiscal drag: a stealth tax rise without changing the headline rate.

Who Gets Caught First
Here are the groups most affected:

Part‑time workers in retail & hospitality

Example
A shop assistant working 25 hours a week at £12/hour earns £15,600. They now pay tax on £3,030 of income, whereas before they might have been under the threshold.

Care workers & health support staff

Many earn just above minimum wage. With wage rises to meet living costs, more of their pay is taxed, reducing take‑home pay.

Seasonal & rural workers

Farmhands, tourism staff, and fishery workers often work part‑time or seasonal contracts. Even modest pay rises now tip them into taxation.

Pensioners with modest private pensions

State pension alone is below the allowance, but add a small occupational pension (say £5,000-£7,000 a year) and they cross the threshold.

Result: pensioners who thought they’d never pay tax again find deductions from their pension income.

Young workers starting out

Apprentices or entry‑level staff may earn just above the allowance. Instead of enjoying their first wage rises, they see tax nibbling away.

Families juggling multiple part‑time jobs

A parent working two part‑time roles may find combined income now taxable, even though each job alone is low‑paid.

Why It Matters
Reduced disposable income
Families already squeezed by fuel, food, and housing costs lose more of their wage increases.

Local impact
Less money circulating in rural shops and services.

Fairness issue
Those least able to absorb higher costs are taxed first, while higher earners often have more ways to shield income.

Caithness Context
Many jobs here are part‑time, seasonal, or minimum‑wage.

Pensioners with small occupational pensions are common, and they’re now being taxed unexpectedly.

Community resilience is weakened when households cut back on local spending.

Freezing the personal allowance is not neutral. It’s a hidden tax rise. It quietly pulls in part‑time workers, carers, pensioners, and seasonal staff. For rural communities, it means tighter budgets and less local spending power.