A Treasury minister has provided a detailed update on the tax implications for households earning between £25,000 and £50,000 a year, following a direct question in Parliament.
Parliamentary Question and Government Response
Conservative MP Wendy Morton asked the Government to estimate the average tax increase for households in that income bracket as a result of recent policies. The response came from Labour's Treasury minister, Dan Tomlinson.
He directed attention to the official 'Impact on households' report published alongside the Budget. According to the minister, this analysis shows that decisions on tax, welfare, and public spending made from the Autumn Budget 2024 onward are 'progressive and benefit households in the lowest income deciles the most'.
Tomlinson emphasised that the tax increases being implemented are 'concentrated on the highest income households'. He added a significant claim: 'On average, all but the richest 10 percent of households will benefit from policy decisions in 2028-29'.
The 'Reeves Freeze' and Its Cumulative Cost
Financial experts have been quick to analyse the long-term impact of the government's central policy: the extended freeze on income tax thresholds. Laura Suter, director of personal finance at AJ Bell, labelled it the 'Reeves Freeze', now extended for a further three years until 2031.
'While not a headline tax hike, make no mistake, this is a tax raise by another name,' Suter stated. She noted the policy's cumulative effect, where frozen thresholds fail to keep pace with inflation, quietly eroding take-home pay through fiscal drag.
The financial impact is stark. According to AJ Bell's calculations:
- Extending the freeze until 2031 will cost individuals up to £1,292 in extra tax over the next three years.
- A person earning £15,000 today will pay an extra £259, due to the frozen £12,570 personal allowance.
- Someone on £45,000 will face an extra tax hit of £683.
- The highest earners will see an extra bill of £1,293.
Broader Consequences and Revenue Forecast
The policy is already reshaping the UK's tax landscape. Since 2021, over 8.3 million people have been pulled into paying higher or additional rate tax—a dramatic increase of 45%.
The extension of the freeze is predicted to push even more working people and pensioners into higher tax bands in the coming years. The scale of revenue generation is substantial. The Office for Budget Responsibility (OBR) forecasts that today's extension alone will raise an extra £12 billion for the Treasury by the 2030/31 financial year.
Suter highlighted a political irony, noting that Chancellor Rachel Reeves, 'when in opposition claimed the policy was 'picking the pocket' of working people'. The move is seen as an attempt to reassure bond markets, even at the potential cost of public popularity.
