The Vanishing Pay Rise
The tax rise
nobody voted for.
Tax thresholds have been frozen since 2021 while wages rose. That silent mismatch, fiscal drag, pulls more of your income into tax every year without a single rate going up. Set your salary and see what the freeze costs you.
See it
Income tax now
under today's frozen thresholds
If thresholds had tracked inflation
uprated since 2021/22 (estimate)
Your marginal rate
tax on your next £1 of pay
Understand it
Normally the tax-free personal allowance and the higher-rate threshold rise each year with inflation, so a pay rise that only keeps pace with prices does not push you into more tax. Since April 2021 they have been frozen instead. As wages climb, the thresholds stay put, so every year a bit more of your income is taxed, and more people are dragged into the 40% band. No rate was raised, so it rarely makes headlines.
This was set in train in 2021 and has since been extended, most recently to 2031, by governments of both parties. The Office for Budget Responsibility estimates the freeze pulls roughly four million more people into income tax and three million more into the higher rate. It is the clearest example of the site's argument: an outcome you feel in your payslip that was decided by policy, not by anything you did.
Fix it
Unfreeze and index the thresholds
Re-link the personal allowance and higher-rate threshold to inflation, so a raise that only tracks prices never costs you more tax.
The trade-off
Gives up around £50bn a year the Treasury now collects from the freeze, which has to be found elsewhere.
Set a legal default to uprate
Make annual inflation uprating the automatic default, so freezing thresholds requires an active, visible decision rather than doing nothing.
The trade-off
Removes a quiet lever chancellors rely on to balance the books without announcing a rise.
Show the drag on every payslip
Require the fiscal-drag effect to be reported alongside the Budget, so the silent rise is named and costed in public.
The trade-off
Transparency only. It exposes the effect but does not by itself reverse it.
Sources & method
- House of Commons Library · Fiscal drag: an explainer.
- House of Commons Library · Freezing the personal allowance and higher-rate threshold: frozen from 2022/23, since extended.
- Office for Budget Responsibility: about 4m more into income tax and 3m more into the higher rate; tens of billions a year.
Income tax is estimated for England, Wales and Northern Ireland on the 2025/26 frozen thresholds (personal allowance £12,570, higher rate £50,270, additional £125,140) versus an illustrative inflation-uprated set. National Insurance is not included. Figures are indicative and for illustration in the prototype.