The UK government’s decision to keep tax thresholds frozen since April 2021 means that many more people are paying more tax.
This so-called fiscal drag means that, as many people have had pay rises to offset inflation, more low earners have been pulled into paying the 20% basic-rate income tax (which kicks in at £12,571) and more people with earnings nearing £50,000 have been tipped into the higher 40% rate (which kicks in at £50,271). (Note, Scotland’s income tax rates and thresholds are set by the Scottish parliament.)
Had the government moved the personal allowance in line with inflation, the financial commentator Paul Lewis says the personal allowance would currently be £14,270 and higher rate of tax would begin at £57,170.
We’d like to hear from you if you have moved up a tax bracket because of the freeze. Did you realise this was going to happen? Has it had a big impact on your finances or financial planning, or have you changed your job or reduced your hours to avoid being pushed into a higher tax band?
We’re also interested in hearing from pensioners who may have been caught out as rising state pensions have pushed them above the frozen personal tax allowance.
This Community callout closed on 17 January 2024.
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You can see the article that included respondents to this callout here.
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