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.
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