British Chancellor of the Exchequer Rishi Sunak holds the budget box in front of Downing Street in London, Great Britain, on March 3, 2021. REUTERS / John Sibley
LONDON (Reuters) – Britain will freeze the amount of money people can earn tax-free as well as the threshold for the higher income tax rate through 2026, Treasury Secretary Rishi Sunak said on Wednesday.
Sunak said that while a base income tax rate of 20% and a higher income tax rate of 40% would not increase, the thresholds for the “personal allowance” of tax-free income, where the higher tax rate starts, would not increase with inflation.
Sunak said the freezing is part of an approach to public finances as he looks for ways to fundraise after unprecedented measures to support jobs and the economy during the coronavirus pandemic.
“This government is not going to raise income tax, social security or sales tax rates. Instead, our first step is to freeze personal tax thresholds, ”Sunak told parliament.
“We will of course keep our promise to increase the personal allowance back to £ 12,570 next year, but we will then keep it at this more generous level by April 2026.”
He added that the higher rate threshold would also rise to £ 50,270 next year, as previously promised, but would then be frozen for the same amount of time.
The personal allowance threshold and the higher rate threshold in England and Northern Ireland were previously £ 12,500 and £ 50,000 per year, respectively.
“No one is going to take home less because of this policy than they are now,” said Sunak.
“But I want to make it clear that this policy removes the added value of having thresholds keep rising with inflation.”
Reporting by Alistair Smout and David Milliken, editing by Elizabeth Piper and James Davey