Chancellor John Healey Extends Income Tax Threshold Freeze to 2031

Chancellor John Healey delivered a Budget that maintains the freeze on income tax thresholds until 2031. This policy, known as fiscal drag, ensures that as earnings rise with inflation, a larger portion of income becomes taxable. The mechanism is expected to generate approximately £55 billion in annual revenue for the Treasury by 2030.

The freeze was originally introduced by Rishi Sunak in 2021 and later extended by Rachel Reeves in 2025. While Healey pledged breathing space for low-income families, reports indicate that middle-class workers will bear the primary cost of the measure.

Prime Minister Andy Burnham acknowledged that fiscal drag is a frequent concern for voters, particularly during by-election campaigns. Despite these concerns, the government opted to keep the freeze in place to manage ongoing pressure on public finances.