Budget 2025: What Today’s Budget Means for Your Pay Packet

The Autumn Budget confirmed that income tax thresholds will remain frozen until April 2029. This affects how much tax working people will pay as earnings change over time.

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If wages rise while thresholds stay the same, a larger portion of income will fall into taxable bands. This is known as fiscal drag.

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Assuming 10% wage growth over three years, here is the effect on tax for different income levels:

Current Income (£)	Current Tax (£)	Future Income (£)	Future Tax (£)	Current Tax % of Income	Future Tax % of Income
25000	2486	27500	2986	9.94	10.86
30000	3486	33000	4086	11.62	12.38
35000	4486	38500	5186	12.82	13.47
40000	5486	44000	6286	13.71	14.29
45000	6486	49500	7386	14.41	14.92
50000	7486	55000	9432	14.97	17.15
55000	9432	60500	11632	17.15	19.23
60000	11432	66000	13832	19.05	20.96

Currently, someone with an income of £25,000 per annum pays 9.94% of their income in tax once the personal allowance is deducted. Assuming that their income increases with inflation over the next 3 years, with tax allowances and thresholds remaining frozen, their tax liability will increase to 10.86% of income.

• Income tax thresholds remain unchanged until 2029.
• Tax rates stay at 20% (basic) and 40% (higher).
• As earnings increase, tax paid and the percentage of income taxed will rise.