In 2021, Chancellor Sunak announced in his budget that income tax personal allowance and the higher rate threshold would remain frozen for four years from 2022/23 until 2025/26. 

As previously announced, the Income-tax increased to  £12,570 for 2021/22 and has remained frozen. 

According to IFS analysis, £20.5bn will be collected in tax rather than £8bn Sunak predicted in March 2021. The freeze in income tax and rising inflation indicate that the treasury will collect £13bn more than predicted. Income tax thresholds usually increase along with inflation, yet they were frozen when inflation was 1.6%.

With inflation expected to rise to 8%, more people are expected to begin paying taxes or pay a higher tax rate. 

These are the income tax rates and bands according to the gov.UK website. 

 

Band

Taxable Income

Tax Rate

Personal Allowance

Up to £12,570

0%

Basic Rate

£12,570 to £50,270

20%

Higher Rate

£50,270 to £150,000

40%

Additional Rate

Over £150,000

45%

Source: GOV. 

Talk to us about your tax. We will be more than happy to help. 

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