Embargoed: 19:00, Sunday 23rd November 2025
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Taxes on median income to be £2,310 higher if threshold freeze extended by two years, compared to if thresholds had not been frozen in 2021-22 and secondary threshold had not been cut.
- Further two year extension would alone add £173 in taxes to the median income.
- TPA calls for chancellor to end freeze to tax thresholds, or at the very least freeze benefits for as long as thresholds are frozen.
The tax paid on a median income will be £2,310 higher if the freeze on income tax and national insurance thresholds is extended to 2029-30, compared to if thresholds had not been frozen in 2021-22 and if the secondary threshold for national insurance on employers had not been cut, new research has found. Of this, £1,698 of the increase has already taken place since 2021-22.
The TaxPayers’ Alliance, which campaigns for lower taxes, has warned ahead of the budget on Wednesday (26th November) that national insurance and income tax on the average earner will be 19 per cent higher by 2029-30 if the chancellor of the exchequer extends the freeze currently in place by a further two years as reported. Two more years of frozen thresholds would alone add £173 in taxes to those on the median income.
Those on the lowest incomes will be hardest hit proportionally, with income tax and national insurance being 30 per cent higher by 2029-30 for the 25th percentile compared to 20 per cent for the 75th percentile. Pensioners will also be impacted, with the new state pension exceeding the personal allowance for the first time in 2027-28. By 2029-30, £189 of tax will be due on the state pension alone.
Other frozen thresholds include ISAs, which are £7,000 lower in 2025-26 compared to if they had risen in line with inflation, the starting rate for savings which is £1,750 lower and the combined inheritance tax nil rate band and residence nil rate band which is £234,000 lower.
The research criticises frozen thresholds as “at odds with the nature of democratic accountability”, saying that “changes in the overall tax burden should only be done through explicit adjustments to headline rates, ensuring that the government has to justify any increase to the public.”
The TaxPayers’ Alliance is calling for benefits to be frozen for as long as tax thresholds are frozen, to ensure fairness between workers and benefits recipients.
CLICK HERE TO READ THE FULL RESEARCH
Key findings:
Income tax and national insurance
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Frozen thresholds represent a substantial tax rise for all groups. Compared to if thresholds had not been frozen since 2021-22 and if the secondary threshold not been reduced to £5,000 in 2025-26, income tax and national insurance in 2025-26 are:
- £1,698 higher on the median income.
- £1,698 higher on 25th percentile incomes.
- £2,222 higher on 75th percentile incomes.
- £4,003 higher on top earnings like those of GPs and consultants.
- Threshold freezes are regressive, with lower earners facing a larger tax rise. Those with 25th percentile incomes face a 25.7 per cent higher tax bill in 2025-26, compared to 15.7 per cent for the median income and 12.9 per cent for 75th percentile incomes.
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If the freeze is extended, the cost to taxpayers will rise even further. By 2029-30, compared to if thresholds had not been frozen since 2021-22 and if the secondary threshold not been reduced to £5,000 in 2025-26, income tax and national insurance will be:
- 18.5 per cent higher on the median income. In cash terms that’s £2,310.
- 30 per cent higher on 25th percentile incomes. In cash terms that’s £2,310.
- 19.5 per cent higher on 75th percentile incomes. In cast terms that’s £3,844.
- 13 per cent higher on the income of GPs and consultants. In cash terms that’s £6,515
- Ending the freeze as planned in 2028-29 would deliver savings for taxpayers. Taxes would be £173 lower for median and 25th percentile incomes, £468 lower for 75th percentile incomes and £872 lower for top incomes by 2029-30 compared to if the freeze was extended.
- Ending the freeze in 2026-27 would deliver more savings for taxpayers. Taxes would be £440 lower for median and 25th percentile incomes, £1,182 lower for 75th percentile incomes and £2,202 lower for top incomes by 2029-30 compared to if the freeze was extended.
- As a result of frozen thresholds those relying solely on the new state pension will have to pay income tax for the first time in 2027-28, with the amount owed reaching £189 by 2029-30.
Other frozen thresholds
- The combined inheritance tax nil rate band and residence nil rate band is £234,000 lower in 2025-26 than it would be if it had increased with inflation, or £468,000 lower for a married couple.
- The amount someone can save in an Individual Savings Account (ISA) in 2025-26 is £7,000 less than it would be if it had increased with inflation, while the starting rate for savings is £1,750 lower.
International context
- 17 of 38 OECD countries had automatic indexing of personal income taxes in 2022, while 21 of 38 had this for social security contributions.
- Around one third of European countries adopted reforms that more than compensated for fiscal drag, another third largely offset it while the last third at least partially offset it.
Recommendations
- Restore frozen tax thresholds to what they would have been if they had not been frozen and commit to automatically uprate them by inflation.
- Abolish unnecessary complications that distort the tax system such as the tapered withdrawals of allowances and additional allowances for specific groups.
- Ensure consistency between the uprating of tax thresholds and the uprating of benefits. If tax thresholds continue to be frozen in nominal terms, then benefits should be frozen as well.
CLICK HERE TO READ THE FULL RESEARCH
Shimeon Lee, policy analyst of the TaxPayers' Alliance, said:
"Freezing tax thresholds is an act of fiscal duplicity, with successive governments using this dirty trick to raise revenues without being upfront with taxpayers.
“And with benefits remaining unfrozen, there is a serious unfairness in the system as working Brits face increased taxes while those on taxpayer-funded benefits see their standard of living protected.
“The chancellor should ideally be uprating thresholds across all taxes to where they would be if they weren’t frozen, but at the very least she shouldn’t be extending the freeze any further and she should be freezing benefits for as long as thresholds remain frozen.”
TPA spokespeople are available for live and pre-recorded broadcast interviews via 07795 084 113 (no texts)
Media contact:
Elliot Keck
Campaigns Director, TaxPayers' Alliance
[email protected]
24-hour media hotline: 07795 084 113 (no texts)
Notes to editors:
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Founded in 2004 by Matthew Elliott and Andrew Allum, the TaxPayers' Alliance (TPA) campaigns to reform taxes and public services, cut waste and speak up for British taxpayers. Find out more at www.taxpayersalliance.com.
- TaxPayers' Alliance's research council.