The personal tax thresholds for income tax and National Insurance will rise in line with inflation in 2028/29 for the first time since the 2020/21 tax year, finally releasing the dreaded fiscal drag which is pulling millions of people into paying tax for the first time and nearly one million taxpayers into higher rate tax.
Although there is still a four year wait until the freeze is removed, this will be welcomed by most people, as it seems that the Labour Gov are sticking to their word to ‘make work pay’.This is ‘the closest to a tax giveaway’.
Although our main comment here would be that the tax revenue foregone from 2028 will be more than recouped by the increase in employers’ national insurance contributions and the reduction to the threshold from which contributions are paid.
‘While this rise may not be felt immediately in the public’s pockets, the potential indirect impact on pay and disposable income in the coming years could compound that of another four years of fiscal drag.’
The end of frozen thresholds will give taxpayers more money in their pocket and could avoid dragging pensioners on the state pension only into income tax.
The Chartered Institute of Payroll Professionals (CIPP) said: ‘The freezing of these thresholds has represented a stealth tax for the years it has been in force, taxing workers more as their wages rise. ‘This will result in workers keeping more of their wages as the thresholds increase in line with inflation in 2028/29.’
It is clear that with this, and other measures in the Budget, the overall tax take will grow. So if you need advice about your personal or business tax matters then please get in touch HERE