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UK Tax Freeze: Millions Face 'Silent Tax Rise'

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  Published in Business and Finance on Sunday, February 22nd 2026 at 16:31 GMT by The Mirror
      Locales: N/A, England, UNITED KINGDOM

Sunday, February 22nd, 2026 - Millions of UK taxpayers are facing a significant, yet often overlooked, financial burden as income tax thresholds remain frozen until 2028. This policy, initially implemented in 2021, is creating a 'cliff edge' scenario where individuals find themselves pushed into higher tax brackets not due to real income gains, but simply because of wage increases that fail to keep pace with the static tax bands. The effect is a stealth reduction in disposable income and a growing concern for household finances across the country.

Experts are sounding the alarm, highlighting how this 'hidden tax rise' erodes purchasing power and impacts savings. Sarah Coles, head of personal finance at Hargreaves Lansdown, aptly describes it as "an extra charge that sneaks in as your income goes up. It means you're paying more tax just to stand still." With inflation remaining a persistent challenge, even modest wage increases can inadvertently trigger a jump to a higher tax bracket, leaving individuals with less money in their pockets.

The Office for Budget Responsibility (OBR) forecasts a stark increase in the number of people paying income tax as a direct consequence of the frozen thresholds. Their projections indicate that approximately 2.1 million more individuals will be subject to income tax by the 2027-28 tax year. This represents a substantial shift in the taxpaying population and underscores the widespread impact of the policy.

Understanding the Tax Bands (as of February 22nd, 2026)

To illustrate the problem, it's essential to understand the current tax band structure:

• Personal Allowance: GBP12,570 (the amount of income you can earn before paying tax)
• Basic Rate: 20% on income between GBP12,571 and GBP50,270
• Higher Rate: 40% on income between GBP50,271 and GBP125,140
• Additional Rate: 45% on income over GBP125,140

These figures, however, haven't adjusted since April 2021. Consider an individual earning GBP51,000 in 2026. While this may seem like a reasonable salary, they are paying a higher proportion of their income in tax than someone earning the same amount in 2021, simply because the threshold for the higher tax bracket hasn't moved. The 'cliff edge' effect becomes acutely apparent as someone crosses these thresholds; a small increase in earnings can lead to a disproportionately large increase in their tax liability.

The Long-Term Implications

The implications of this frozen threshold extend beyond immediate financial strain. It discourages wage increases, potentially stifling economic growth. Employees may be hesitant to pursue promotions or ask for raises if a significant portion of those gains will be absorbed by higher taxes. Furthermore, it disproportionately affects middle-income earners who are most likely to be caught in this 'cliff edge' scenario.

There's also growing debate about the fairness of the system. Critics argue that freezing thresholds while wages increase effectively reduces the real value of the personal allowance, eroding its intended purpose of providing a tax-free income for basic needs. The situation is further complicated by the ongoing cost of living crisis, which has already squeezed household budgets and left many struggling to make ends meet.

What Can Individuals Do?

While taxpayers can't change government policy, there are steps they can take to mitigate the impact:

• Review Payslips: Regularly check your payslip to ensure your tax code is correct and you are not overpaying.
• Tax-Efficient Savings: Utilize tax-efficient savings schemes like Individual Savings Accounts (ISAs) to shield some income from tax. Explore Lifetime ISAs for long-term goals like retirement or purchasing a first home.
• Pension Contributions: Increasing pension contributions not only provides for your future but also reduces your taxable income in the present.
• Claim All Allowances: Ensure you are claiming all available allowances and deductions, such as those for work-related expenses or charitable donations.
• Seek Professional Advice: Consider consulting a financial advisor for personalized advice tailored to your specific circumstances.

Looking Ahead The current trajectory points to a continuation of this silent tax squeeze until 2028. Unless the government intervenes to adjust the thresholds, millions more individuals are likely to be dragged into higher tax brackets, further exacerbating financial pressures on households. The situation warrants close monitoring and proactive financial planning to navigate this challenging economic landscape.