What happened: Chancellor Rachel Reeves has announced that income tax thresholds will remain frozen until the 2030-31 tax year. This means tax bands will not adjust for inflation or wage growth during this period.
Why it matters:
- More taxpayers may be pushed into higher tax brackets as their incomes rise, increasing their tax bills.
- The government aims to reduce the budget deficit by increasing tax revenues without raising rates.
MNN Take: Freezing tax thresholds leads to 'fiscal drag,' where inflation and pay rises cause more income to be taxed at higher rates, effectively increasing tax revenue over time without changing tax rates.
Sources: Guardian UK