{"id":568212,"date":"2025-11-28T16:20:05","date_gmt":"2025-11-28T16:20:05","guid":{"rendered":"https:\/\/www.finder.com\/uk\/?p=568212"},"modified":"2025-11-30T01:13:52","modified_gmt":"2025-11-30T01:13:52","slug":"fiscal-drag-race","status":"publish","type":"post","link":"https:\/\/www.finder.com\/uk\/media\/fiscal-drag-race","title":{"rendered":"Fiscal drag race: The stealth tax you won\u2019t hear about at the Budget"},"content":{"rendered":"<ul><li>The chancellor is reportedly considering extending the freeze on income tax thresholds until 2030<\/li><li>This could mean a double whammy for Brits if rumoured income tax hikes are also announced at the Budget<\/li><li>Someone earning \u00a336,500 when the freeze began in 2021 could be a higher-rate taxpayer by 2030<\/li><\/ul><p><b>5 November 2025, LONDON \u2013<\/b><\/p><p>The chancellor has not ruled out extending the freeze on income tax thresholds at the Autumn Budget, according to various reports. If this happens, projections by the personal finance comparison site Finder show that 9 million more people could be dragged into a higher tax bracket by 2030.<\/p><p>In theory, income tax brackets should rise along with wage growth, but when they don&#8217;t it means people get dragged into higher tax brackets than they otherwise would. This is known as fiscal drag. The thresholds were frozen in April 2021 and were due to end in 2028, but there have been reports that this could be extended by up to 2 years to April 2030. <\/p><p>This would mean 3.3 million more basic rate taxpayers, 4 million more higher rate taxpayers and 1.7 million more additional rate taxpayers. Higher and additional rate taxpayers would make up 3 in 10 taxpayers (29%), compared to just 3 in 20 (15%) in 2021\/2022 when the freeze began. <\/p><p>If someone earning \u00a336,500 in 2021 received salary increases in line with past and projected inflation for those 9 years (roughly 3.7% per year) &#8211; they could be earning \u00a350,475 by 2030. If tax thresholds remain frozen, they would be dragged into the higher-rate tax bracket while earning the same in real terms, meaning they would effectively lose spending power. <\/p><p>Fiscal drag could also push many HENRYs (high earners, not rich yet) into the additional-rate tax bracket. For example, a medical consultant earning around \u00a395,000 in 2021, with pay rising broadly in line with inflation, would have moved past \u00a3100,000 by 2023 and could be earning over \u00a3130,000 by 2030. As well as paying the additional rate of income tax on anything over \u00a3125,140, they also lose valuable benefits like the tax-free personal allowance and free childcare entitlement. <\/p><p><b>Kate Steere, personal finance expert at the comparison site Finder, said:<\/b><\/p><p>&#8220;There&#8217;s a lot of chat about income tax hikes as we approach the Budget, but I am also expecting to see the Chancellor extend the freeze on income tax thresholds for another 2 years. This is in itself a stealth tax, affecting millions of people without them realising anything has changed. It&#8217;s possible that Brits will be hit twice over &#8211; once with an increase in rates and once with a freeze extension. <\/p><p>&#8220;Fiscal drag impacts ordinary working Brits, not just the highest earners. Recent high inflation has meant millions are paying more tax without any improvement in their spending power. Being in a higher tax bracket doesn&#8217;t just impact your pay packet &#8211; you also get a smaller tax-free savings allowance, along with having to pay higher rates of capital gains tax and dividend tax<\/p><p>&#8220;That&#8217;s why it&#8217;s more important than ever to maximise tax-free savings. A cut to the cash ISA limit is also looking likely &#8211; so people should move their savings to a tax wrapper before April to ensure they are protected. Workers can also look to increase pension contributions &#8211; not only does this reduce your tax liability, but higher contributions will only benefit your retirement pot in the long run.&#8221;<\/p>","protected":false},"excerpt":{"rendered":"<p>The chancellor has not ruled out extending the freeze on income tax thresholds at the Autumn Budget, according to various reports. If this happens, projections by the personal finance comparison site Finder show that 9 million more people could be dragged into a higher tax bracket by 2030.<\/p>\n","protected":false},"author":1312,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"apple_news_api_created_at":"","apple_news_api_id":"","apple_news_api_modified_at":"","apple_news_api_revision":"","apple_news_api_share_url":"","apple_news_cover_media_provider":"image","apple_news_coverimage":0,"apple_news_coverimage_caption":"","apple_news_cover_video_id":0,"apple_news_cover_video_url":"","apple_news_cover_embedwebvideo_url":"","apple_news_is_hidden":"","apple_news_is_paid":"","apple_news_is_preview":"","apple_news_is_sponsored":"","apple_news_maturity_rating":"","apple_news_metadata":"\"\"","apple_news_pullquote":"","apple_news_pullquote_position":"","apple_news_slug":"","apple_news_sections":[],"apple_news_suppress_video_url":false,"apple_news_use_image_component":false,"footnotes":""},"categories":[3788],"tags":[],"asset_tag":[],"class_list":["post-568212","post","type-post","status-publish","format-standard","hentry","category-media"],"apple_news_notices":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.9 (Yoast SEO v24.9) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Fiscal drag race: The stealth tax you won\u2019t hear about at the Budget - Finder UK<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.finder.com\/uk\/media\/fiscal-drag-race\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Fiscal drag race: The stealth tax you won\u2019t hear about at the Budget\" \/>\n<meta property=\"og:description\" content=\"The chancellor has not ruled out extending the freeze on income tax thresholds at the Autumn Budget, according to various reports. 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