A worker earning around £33,000 is projected to lose about £175 a year under a moderate wage rise, while someone closer to £35,000 could face a £200 reduction in take home pay. Ruth Curtice, Chief Executive of the Resolution Foundation, said the freeze has come at a cost for millions of low to middle earners.
She explained that sticking to Labour’s manifesto pledge not to raise headline tax rates means many households would have been better off if thresholds had increased with inflation rather than remaining fixed. She warned that households should expect further tough Budgets until economic growth and living standards improve.
Every worker receives a personal allowance of £12,570 before income becomes taxable. Earnings between £12,571 and £50,270 are charged at the basic rate of 20 per cent, while income from £50,271 to £125,140 is taxed at 40 per cent. Any income above that level is taxed at 45 per cent. Savings and property income may attract additional charges.
Higher earners face further reductions, as personal allowances begin to taper once total income exceeds £100,000. For every £2 earned above that threshold, £1 of personal allowance is removed. Anyone earning £125,140 or more receives no tax free personal allowance at all.
Speaking to the Guardian, one Briton described the strain on their household finances. They said the family is struggling to save, pay bills and afford food despite working consistently and contributing to the economy. They added that the system feels increasingly inefficient and that the pressure on working families continues to intensify.
