Tax and National Insurance Thresholds Frozen Until April 2031 as Fiscal Drag Continues

The government plans to maintain the income tax personal allowance at £12,570 and the higher rate threshold at £50,270 until April 2031; for National Insurance contributions, the primary threshold and lower profits limit will be held at £12,570 until April 2031; and the employer National Insurance secondary threshold will remain at £5,000 until April 2031.

There are no changes to the tax and National Insurance thresholds for 2026/27, and the tax and NI threshold freeze is to be extended by three years until 2030/31. This represents an effective tax rise through a process called "fiscal drag," where inflation pushes wages above frozen thresholds without any legislative change.

The impact on wages

• The frozen personal thresholds mean that even as gross pay rises to combat inflation, a larger proportion of that extra income falls into taxable bands, eroding the real value of those pay rises and affecting perceived income.
• While the announcements provide clarity for individuals and businesses, the practical effect of these measures is a form of fiscal drag.

As a working resident, your take-home pay will effectively shrink relative to salary increases because more of each pay rise will be taxed or face National Insurance contributions. For self-employed foreigners and landlords, this means higher tax bills as incomes rise—even if thresholds remain static, your effective tax rate climbs. Check your Personal Tax Account regularly and plan for higher HMRC liabilities across the decade to 2031.

Sources

• Deloitte Tax Landscape — Key Income Tax and NI Thresholds Frozen
• Stafftax — Tax Changes 2026/27