No Income Tax rate went up in the November 2025 Budget, and several tax rates haven’t moved in years elsewhere either. It’s tempting to read that as good news, and in one sense it is – but freezing a threshold does almost the same job as raising a rate, just more quietly. Wages and asset values keep moving upward with inflation; the point at which tax starts, or starts at a higher rate, doesn’t move at all. Economists call this fiscal drag. Most people just notice their tax bill creeping up despite nothing obviously having changed. This guide brings together every threshold currently frozen, or effectively frozen through years of inaction, in one place.
Income Tax thresholds: frozen until April 2031
The freeze that began in April 2022 has now been extended twice, most recently by Chancellor Rachel Reeves in November 2025, and Income Tax thresholds will stay exactly where they are until April 2031. The Office for Budget Responsibility was specific about the cost of this latest extension alone: an additional £8.3 billion in tax revenue by 2029/30, £7.6 billion of it from Income Tax, with around 920,000 more workers dragged into the higher-rate band and a further 4,000 into the additional-rate band as a direct result.
That’s the effect of this one extension in isolation. Zoom out to the whole freeze since 2021, and the House of Commons Library’s cumulative figures are considerably larger: 4.8 million more people paying the higher rate by 2030/31, 600,000 more in the additional-rate band, and 700,000 people drawn into paying Income Tax who wouldn’t otherwise be paying it at all. The share of taxpayers caught in the higher or additional-rate bands has risen from 15% in 2021 to a projected 24% by 2030/31 – very nearly one in four. Across the full freeze period, the OBR puts the total additional revenue raised at £55.5 billion in 2030/31 alone.
Inheritance Tax: nil-rate bands frozen until April 2031
The Inheritance Tax nil-rate band has sat at £325,000 since 2009/10, and the residence nil-rate band at £175,000 since it was introduced, with the freeze on both now extended by a further year to April 2031. That’s forecast to raise an extra £2.355 billion by 2029/30, as more estates are pulled above a threshold that hasn’t moved in well over a decade while property and investment values generally have.
ISAs and Junior ISAs: frozen until 2031, with a further change from 2027
The total ISA subscription limit stays frozen at £20,000 until 2031, and the Junior ISA limit at £9,000, together forecast to raise £605 million over the same period. Layered on top of that, separately, the amount you can put into a Cash ISA each year falls to £12,000 for savers under 65 from April 2027 – a change to the mix of allowances rather than the overall total, but one worth knowing about if you rely heavily on cash savings within an ISA wrapper.
Capital Gains Tax: the annual exempt amount has been cut in stages, not just frozen
This one has actually gone further than a freeze. The Capital Gains Tax annual exempt amount stood at £12,300 as recently as 2022/23, was cut to £6,000 the following year, then to £3,000 from 2024/25, and remains at £3,000 for 2026/27. A gain that would once have sat comfortably within a tax-free allowance can now trigger a CGT bill on a much smaller profit – worth bearing in mind when rebalancing a portfolio of investments held outside an ISA or pension.
Dividend allowance: down to £500, with rates rising on top
The dividend allowance has followed a similar path, falling from £2,000 in 2022/23 to £1,000 the year after, and to £500 from 2024/25, where it remains for 2026/27. Unusually, the rates charged above that allowance have risen as well: basic-rate dividend tax is now 10.75%, up from 8.75%, and the higher rate 35.75%, up from 33.75%. For anyone holding shares or funds outside a tax wrapper, this is one of the more direct examples of a smaller allowance and a higher rate working together.
The £3,000 gift exemption: frozen since 1981
Some thresholds haven’t technically been frozen by policy at all – they’ve simply never been updated, which amounts to much the same thing over a long enough period. The £3,000 annual gift exemption, the amount you can give away each tax year immediately outside your estate for Inheritance Tax purposes, has sat at that level since 1981. Had it risen with inflation, it would be worth in the region of £13,600 today – meaning its real value has fallen by roughly 78% over 45 years, all without a single announcement calling it a cut.
What you can actually do about it
You can’t move any of these thresholds yourself, but you can often influence where you sit against them.
- Increasing pension contributions reduces your taxable income and can keep you out of a higher Income Tax band altogether, at the cost of lower take-home pay now in exchange for a larger pension later – a trade-off worth modelling properly rather than guessing at.
- Using your ISA allowance in full each year keeps growth and income away from both Dividend and Capital Gains Tax entirely, which matters more with each of those allowances than it used to.
- On the Inheritance Tax side, reviewing how and when you gift, and whether your estate plan still reflects current thresholds rather than the ones in place when it was last reviewed, tends to matter more the longer a freeze runs.
With the next Budget due on 28 October 2026, it’s worth treating every figure in this guide as a snapshot rather than a permanent fixture – thresholds this politically convenient to leave frozen have a habit of being extended again.
Let’s look at where you actually sit
We work with clients across Poole, Bournemouth and the wider Dorset area to understand exactly where fiscal drag is likely to affect their own tax position across all of these areas, and what’s worth doing about it before the next freeze extension arrives rather than after. If you’d like to talk through your own situation, get in touch and we’re happy to have a no-obligation conversation.
This article is for general information only and does not constitute advice. The information is aimed at individuals only. All information is correct at the time of writing (September 2026) and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of current HMRC legislation and OBR forecasts, both of which are subject to change.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
The Financial Conduct Authority does not regulate tax planning or will writing.