HMRC data shows the UK income tax net widening, with taxpayers projected to rise from 36.7 million in 2023/24 to 40.8 million in 2026/27. Rising incomes, population growth and frozen thresholds are the main causes.
Tax rates are unchanged, but fixed allowances create fiscal drag as wages and pensions increase. More people therefore begin paying tax or enter higher-rate bands.
Workers receiving pay rises, pensioners with private income and higher earners are among those most affected. The impact depends on income, allowances, pension contributions and tax status.
Key highlights:
- HMRC projects 40.8 million income taxpayers in 2026/27.
- Higher-rate taxpayer numbers are projected to reach 7.7 million.
- Around 9.58 million taxpayers are projected to be above State Pension age.
- The standard Personal Allowance remains £12,570.
- The main threshold freeze is scheduled to continue until 5 April 2031.
- Figures after 2023/24 are projections rather than final taxpayer counts.
What Does the Latest Tax Threshold Freeze HMRC Data Show?
The release published on 15 July 2026 contains finalised outturn data for 2023/24, revised projections for 2024/25 and 2025/26, and the first projection for 2026/27.
The forecasts are modelled from the 2023/24 Survey of Personal Incomes using economic assumptions consistent with the March 2026 fiscal forecast.
Taxpayer numbers at a glance:
| Taxpayer category | 2023/24 outturn | 2026/27 projection | Change indicated |
| All income taxpayers | 36.7 million | 40.8 million | A wider overall tax base |
| Basic-rate taxpayers | 29.4 million | 31.4 million | More people paying income tax |
| Higher-rate taxpayers | 5.76 million | 7.7 million | More taxpayers reaching higher bands |
| Additional-rate taxpayers | 893,000 | 1.29 million | Income growth and threshold changes |
| Above State Pension age | 8.16 million | 9.58 million | Greater pensioner exposure |
HMRC projects higher-rate taxpayers will increase from 15.7% of the taxpayer population in 2023/24 to 18.9% in 2026/27. Additional-rate taxpayers are projected to rise by 44% over the same period.
These are liability estimates, not cash-receipt figures. Income tax liabilities relate to tax due on income arising during a tax year, whereas receipts record when money is collected. Payment timing, particularly through Self Assessment, means the two measures do not match exactly.
How Has the Income Tax Threshold Freeze Expanded Since 2021?
The UK income tax threshold freeze has been extended several times since it was first announced in 2021. What began as a temporary measure through 2025/26 now keeps key allowances and tax bands fixed until April 2031.
The 2021 Threshold Freeze Decision
The original policy fixed the Personal Allowance at £12,570 and the higher-rate threshold at £50,270 from 2022/23 to 2025/26. Rates were not increased as part of that decision, but the cash value of the thresholds stopped rising with inflation.
Why Was the Freeze Extended in 2022?
The 2022 Autumn Statement extended the income tax threshold freeze by two years, moving its planned end from April 2026 to April 2028. This kept the Personal Allowance and key tax bands fixed while incomes continued to rise.
The main changes included:
- Extending the wider threshold freeze for two additional tax years
- Reducing the additional-rate threshold from £150,000 to £125,140 from April 2023
- Bringing more high-income taxpayers into the additional-rate band
The threshold reduction was a separate measure from the wider freeze. Growth in additional-rate taxpayers reflects both the lower threshold and rising taxable incomes.
The Further Extension to April 2031
The 2025 Budget extended the freeze through 2030/31. Under the current threshold freeze policy timetable, the Personal Allowance remains £12,570, the basic-rate limit remains £37,700 and the higher-rate threshold remains £50,270 until 5 April 2031.
The legislative default is for the Personal Allowance and basic-rate limit to rise with consumer price inflation after that point, although a future government could change the policy again.
What Does a Freeze in Income Tax Thresholds Mean for Take-Home Pay?
A threshold freeze means the tax-free allowance and tax-band boundaries stay unchanged in cash terms. When earnings or pensions increase, a larger share of income may consequently become taxable.
Where fiscal drag appears?
- People previously below £12,570 may begin paying income tax.
- Basic-rate taxpayers may move into the higher-rate band.
- Higher earners may lose part or all of their Personal Allowance.
- Pensioners may become taxable when State Pension and private income are combined.
- Pay rises may produce a smaller net increase than employees expect.
Crossing a threshold does not mean the entire salary is charged at the new rate. For a taxpayer outside Scotland with a standard allowance, only the portion above £50,270 normally enters the 40% band. The bands are different for Scottish non-savings, non-dividend income.
Fiscal drag can therefore raise a person’s average tax rate without a formal increase in the headline rate. The financial effect becomes larger when thresholds remain fixed for several years and nominal incomes continue to grow.
Who Will Pay More as the UK Tax Net Widens?
The threshold freeze affects more than high earners. As wages, pensions and other taxable income rise, some people begin paying income tax while others move into higher marginal-rate bands.
Groups Facing Greater Exposure:
- Part-time workers: Earnings may rise above the £12,570 Personal Allowance.
- Employees: Pay awards, promotions and bonuses can increase tax exposure.
- Multiple-income earners: More than one job or income source may raise total taxable income.
- Pensioners: State and workplace pensions may together exceed the allowance.
- Higher earners: Income above £50,270 may enter the higher-rate band.
- £100,000-plus earners: The Personal Allowance reduces by £1 for every £2 of extra income.
- Scottish taxpayers: Separate income tax bands apply.
Higher rates apply only to income within each band, not the entire salary.
Why Are More Pensioners Being Drawn into Income Tax?
More pensioners are being drawn into income tax because retirement incomes are rising while the Personal Allowance remains fixed.
The effect is especially noticeable where the State Pension is combined with workplace pensions, savings interest or other taxable income.
State Pension Growth Versus a Frozen Personal Allowance
The State Pension is taxable income, although tax is not usually deducted directly from the pension payment. The full new State Pension is £241.30 a week in 2026/27, equivalent to £12,547.60 over 52 weeks—only £22.40 below the standard Personal Allowance.
A Treasury spokesperson said:
“Anyone whose only income is the full new or basic State Pension without any increments will not pay income tax.”
However, even a modest workplace pension, private withdrawal or taxable savings income can push total income above £12,570. The official pension income guidance confirms that State Pension, private pensions, earnings and other taxable income are considered together when establishing liability.
The widely reported 10.2 million figure concerns taxpayers aged 65 and over. HMRC’s separate projection of 9.58 million concerns people above a modelled State Pension age of 66.25 in 2026/27. The totals use different age definitions and are not directly interchangeable.
Which Pensioners Are Most Exposed?
Pensioners with several taxable income sources are most likely to be affected by frozen thresholds.
Those at greater risk include people receiving:
- Workplace or personal pensions alongside the State Pension
- Earnings from employment or self-employment
- Taxable savings, investments or rental income
- Overseas pensions or protected State Pension payments
Tax may be collected through the PAYE code on a private or workplace pension. More complex cases may require a tax calculation or Self Assessment.
The issue is not age alone. Liability depends on total taxable retirement income, rising pension payments and a Personal Allowance that remains fixed
How Much More Tax Could Workers and Pensioners Pay?
The following examples use 2026/27 rates for England, Wales and Northern Ireland and assume the standard Personal Allowance. They exclude National Insurance, pension contributions, student loan deductions, benefits and other reliefs.
Simplified tax examples:
| Illustrative position | Taxable calculation | Approximate income tax |
| Worker earning £13,500 | £930 at 20% | £186 |
| Employee earning £55,000 | £37,700 at 20%; £4,730 at 40% | £9,432 |
| Pensioner receiving £12,547.60 State Pension plus £3,000 workplace pension | £2,977.60 at 20% | £595.52 |
| Employee earning £110,000 | Allowance reduced to £7,570 before bands apply | £33,432 |
The £55,000 employee pays 40% only on the £4,730 above the higher-rate threshold, so the higher salary still increases take-home pay before other deductions.
At £110,000, the Personal Allowance falls by £5,000 because income is £10,000 above the taper starting point. Pension contributions and Gift Aid may alter the result.
Online calculators are useful guides but may not reflect every tax code, income source, benefit, pension arrangement or Scottish rate.
When Will the Personal Allowance Increase, and Could Labour Change the Timetable?
The Personal Allowance is currently set to remain frozen until April 2031, although future Budgets could revise that timetable. No earlier increase has been confirmed, so taxpayers should rely on current policy rather than speculation.
The Current Timetable to April 2031
Under current policy, the Personal Allowance will remain at £12,570 and the basic-rate limit at £37,700 until 5 April 2031. For many taxpayers in England, Wales and Northern Ireland, this keeps the higher-rate threshold at £50,270.
Unless the government changes the law, inflation-linked increases are expected to resume after the freeze ends. However, future Budgets could extend, shorten or otherwise revise the timetable.
Will Labour Increase the Personal Tax Allowance Before Then?
No earlier increase has been confirmed. The Labour government extended the freeze in the 2025 Budget rather than allowing inflation-linked increases to resume after 2027/28.
In the official Budget speech transcript,
Chancellor Rachel Reeves said:
“I know that maintaining these thresholds is a decision that will affect working people”
That statement acknowledges the household impact, but it does not establish whether another fiscal event will alter the timetable. An allowance increase would normally require a Budget announcement, fiscal statement or legislative change.
What Could Change the Current Policy?
The timetable could be reconsidered if economic or political conditions change.
Future decisions may be influenced by:
- Inflation and nominal earnings growth.
- Public-service and revenue pressures.
- Updated economic and fiscal forecasts.
- Labour-market or behavioural effects.
- A future Budget or a change in government policy.
Until an official change is announced, taxpayers and businesses should plan around the legislated or formally proposed timetable rather than political speculation.
What Does a Wider Tax Net Mean for UK Workers, Employers and the Public Finances?
A wider tax net means pay rises may still increase take-home income, but by less when more earnings become taxable or enter higher-rate bands. Employers may also face more questions about tax codes, salary sacrifice, pensions, bonuses and the difference between gross and net pay.
For the government, frozen thresholds raise revenue without increasing headline tax rates. The latest extension is forecast to generate £3.1 billion in 2028/29 and £11.6 billion by 2030/31 compared with inflation-linked thresholds.
By 2030/31, modelling suggests 5.2 million more income taxpayers, 4.8 million more higher-rate taxpayers and 600,000 more additional-rate taxpayers. These figures are forecasts, while individual outcomes depend on income and personal circumstances.
Conclusion
The latest tax threshold freeze HMRC data shows that the UK tax net is widening as incomes rise against fixed allowances and bands.
More workers, pensioners and higher earners are likely to face larger tax bills, even without headline rate increases.
The impact will vary by income, location and personal circumstances, but the trend is clear: fiscal drag is becoming a more significant factor for households, employers and public finances overall through to April 2031.
FAQs
What does the tax threshold freeze mean for me?
A person may pay more if taxable income rises while the Personal Allowance and tax bands remain fixed. Someone below £12,570 may become a taxpayer, while an existing taxpayer may move into a higher marginal band.
Is it better to earn £50,000 or £55,000 in the UK?
Earning £55,000 will generally provide more take-home pay than earning £50,000. Only the income above the relevant higher-rate threshold is normally taxed at 40%, rather than the entire salary.
Is the UK the most heavily taxed country?
There is no single definitive measure. Comparisons can examine total tax revenue relative to GDP, taxes on employment, consumption taxes or household tax burdens. The UK ranks differently depending on the measure and countries selected.
What age do people stop paying National Insurance?
Employees usually stop paying employee National Insurance contributions when they reach State Pension age, even if they continue working. Income tax can still apply after that age.
Does a woman who has never worked get a State Pension?
Possibly. Eligibility can arise through National Insurance credits, voluntary contributions or certain historic spouse and civil-partner rules. Under the new system, at least 10 qualifying years are normally required to receive any new State Pension.
What is considered a rich pensioner?
There is no official tax definition. Assessments may consider pension income, savings, investments, property wealth, household size and living costs. A pensioner paying income tax is not necessarily wealthy.
Do taxpayers pay 40% on their entire salary after crossing the threshold?
No. The 40% rate normally applies only to the portion of taxable income within the higher-rate band. Income in lower bands continues to be taxed at the applicable lower rates.
Note: This article provides general information based on official statistics, forecasts and current tax guidance. It is not personalised financial, tax, pension or legal advice. Figures for 2023/24 are estimates, while later years are projections and may change. Examples are simplified and may not reflect every allowance, deduction or income source. Scottish income tax rules differ. Readers with complex circumstances should check official guidance or seek qualified advice.