Anyone earning between £20,000 and £60,000 handed up to £1,099 pay rise thanks to Budget

Millions of workers are set to get a pay rise as Labour Party Chancellor Rachel Reeves reveals income tax threshold changes. The Government will not extend the freeze on income tax and national insurance thresholds beyond 2027/28, the Chancellor has announced, saying it would “hurt working people” to keep thresholds frozen.

Thresholds usually rise each year in line with inflation but were frozen under the previous Conservative government until 2028. An extension of the freeze would have meant that individuals earning between £20,000 and £35,000 a year would have been up to £366 worse off by 2030.

Those with an annual income of £60,000 would have faced a reduction of up to £1,099 by the end of the decade. However, Chancellor Rachel Reeves said today: "The previous government froze income tax and National Insurance thresholds in 2021 and then they did so again after the mini-budget."

READ MORE New £175 charge for drivers starting today is 'disaster'

On income tax and National Insurance thresholds, the Chancellor told MPs: "Extending their threshold freeze for a further two years raises billions of pounds – money to deal with the black hole in our public finances and repair our public services."

“Having considered the issue closely, I have come to the conclusion that extending the threshold freeze would hurt working people. It would take more money out of their payslips. I am keeping every single promise on tax that I made in our manifesto. So there will be no extension of the freeze in income tax and National Insurance thresholds beyond the decisions of the previous government.

“From 2028-29, personal tax thresholds will be uprated in line with inflation once again. When it comes to choices on tax, this Government chooses to protect working people every single time.” Steven Cameron, pensions director at Aegon, said: "According to analysis by the OBR, the current freeze will see millions more people starting to pay income tax or paying at a higher rate - between 2022-23 and 2028-29.

"This set of threshold freezes means nearly 4million additional individuals will be expected to pay income tax, 3million more will have moved to the higher rate, and 400,000 more onto the additional rate."