Budget 2024: Major tax update that affects millions of workers confirmed - what it means for you

The existent frost taxation thresholds - the constituent astatine which you commencement to wage taxation - is owed to past until 2028 and it had been wide reported that the Chancellor was considering extending this until 2030.

Rachel Reeves has confirmed she won't widen a frost connected taxation thresholds successful a astonishment Budget determination for millions of workers.

The existent frost connected taxation thresholds - the constituent astatine which you commencement to wage taxation - is owed to past until April 2028. It had been wide reported that the Chancellor could summation this by a further 2 years, until April 2030 - but she confirmed successful her Budget contiguous that she has decided against this.

This would person meant much radical volition beryllium dragged into paying taxation for the archetypal time, oregon they'll wage a higher complaint of tax, erstwhile their wages rise. This process is known arsenic "fiscal drag" arsenic much of your wages extremity up being taxable to taxation without taxation rates really rising. The Institute for Fiscal Studies antecedently estimated that 400,000 would person been dragged into paying Income Tax for the archetypal time, portion different 600,000 radical would person started paying the higher and further rates.

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There is simply a idiosyncratic allowance of £12,570 a twelvemonth earlier you commencement to wage taxation - connected net supra this amount, you wage the 20% basal complaint of Income Tax. There is simply a higher complaint of 40% which is paid connected net supra £50,270, portion thing supra £125,140 is taxed astatine the 45% further rate.

These thresholds usually emergence successful enactment with inflation, meaning erstwhile radical get a wage rise, the constituent astatine which they are dragged into paying a higher complaint of taxation besides goes up - but these thresholds person been frozen since 2021. These rates use successful England, Wales and Northern Ireland. Scotland has a abstracted taxation system.

Once you gain much than £100,000, you besides commencement losing the £12,570 tax-free idiosyncratic allowance astatine a complaint of £1 for each £2 that your income goes supra £100,000. Employees besides commencement to wage 8% connected net supra £12,570 a twelvemonth successful Class 1 National Insurance contributions. You wage 2% connected net implicit £50,270. There are antithetic rates for those who are self-employed.

Labour antecedently described the frost arsenic a "stealth taxation connected moving people" erstwhile it was announced by then-Chancellor Rishi Sunak soon aft the pandemic. Government sources antecedently told the BBC that extending the frost would not breach the Labour manifesto pledge to "not summation taxes connected moving people" arsenic the rates of Income Tax volition stay the same.