Tax payers are already paying hundreds of pounds more than they would have if thresholds had been allowed to rise with prices since 2021, when they were frozen by the previous government.
Inflation has been high in recent years, making the impact of frozen thresholds bigger.
After a decade of frozen tax thresholds, in 2031, the policy will have raised £56bn in total, £12bn from the three-year extension just announced. That’s money that helps pay for the NHS, schools and support for the sick, disabled and the elderly.
As things currently stand, thresholds are expected to start rising again in 2031.
However, there is no fundamental principle at stake, no size that is the “right” size for the tax free personal allowance. Before the financial crisis the personal allowance before you start paying tax was around £5,000, much smaller than today, even allowing for inflation, and it was allowed to grow until the pandemic hit.
