People earning £30,000 risk losing £685 thanks to change in Budget

Workers on medium wages face being clobbered with tax bills of hundreds of pounds in the wake of the Labour Party Budget, it has been warned. Chancellor Rachel Reeves has chosen not to extend the freeze on income tax thresholds, which will now begin to rise again in 2028.

Tax thresholds usually rise in line with inflation. In 2022, however, the previous Conservative government froze thresholds until 2028. The policy to freeze the limits means that more people pay higher rates of tax as their salary increases and they move into higher tax bands.

AJ Bell warns the current threshold freeze will add an estimated £685 to your tax bill in 2027/28 if you earn £30,000. Explaining the decision, Reeves said: “Having considered this issue closely, I have come to the conclusion that extending the threshold freeze would hurt working people and take more money out of their pay slips. I am keeping every single promise on tax that I made in our manifesto.

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“There will be no extension of the freeze in income tax and national insurance thresholds beyond the decisions by the previous government. From 2028-29, personal tax thresholds will be uprated in line with inflation once again.”

On the news, Alastair Black, head of savings policy at abrdn, said: “We are glad that the income tax freeze was not extended beyond 2028. Many thresholds haven’t moved for several years. While more people will continue to be pulled into a higher tax band while the freeze is still in place, the impact will be lessened in the future.”

There will be no changes to employees’ NICs, and income tax brackets will only be frozen until 2028. “When it comes to choices on tax, this government chooses to protect working people every single time,” Chancellor Ms Reeves also said.