Growing impact of frozen tax thresholds revealed

New evidence has shown just how much of an impact frozen tax thresholds are having on the UK’s taxpayers.

Fresh Evidence

HMRC’s latest tax receipts figures show that income tax revenues continue to climb – between April and July 2026, HMRC collected £117.6 billion in income tax – up from £109.8 billion compared to the previous year.

PAYE income tax receipts rose from £97 billion to £103.8 billion over the same period.

Personal allowance has remained fixed at £12,570 since April 2021, and the higher-rate threshold has been frozen at £50,270.

Frozen Thresholds Steadily Increase Tax Revenues

The Association of Taxation Technicians (ATT) says the latest receipts figures demonstrate how frozen thresholds can steadily increase tax revenues without any change to headline tax rates.

Emma Rawson, Director of Public Policy at the ATT, commented, “The latest figures provide a clear illustration of how frozen tax thresholds affect taxpayers in the real world.

“Between April and July this year, HMRC collected almost £8 billion more in income tax than during the same period last year, despite no material increases in tax rates. While there are a range of factors behind rising tax receipts, continuing freezes to the main income tax thresholds are undoubtedly playing a significant role.

“Freezing allowances and thresholds is an effective way of increasing tax revenues without the negative publicity that often accompanies rises in headline tax rates. As earnings increase over time, more people are brought into paying tax, and more taxpayers are pushed into higher tax bands.

“The personal allowance and higher-rate threshold have now remained unchanged since 2021 and are due to stay frozen until 2031. That’s a decade with no increase whatsoever, despite significant changes in earnings and prices over that period.”

Rawson added, “There have been persistent rumours that the Government could revisit the threshold freeze, but any meaningful change would come at a substantial cost to the Exchequer and would likely require either tax rises or spending reductions elsewhere.

“At the same time, the longer thresholds remain frozen, the more expensive it becomes to reverse the policy. Each passing year brings more taxpayers into the system and increases the gap between current thresholds and where they might otherwise have been.”

To find out more about contracting, please get in touch with Jaime on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com.