Finance bill briefing: Clause 10 - Basic rate limit and personal allowance for tax years 2028-29 to 2030-31
Clause 10 extends the freeze of the personal allowance and basic rate income tax band for a further three years until 2030/31. Our briefing raises concerns about the impact of the freeze on people with low incomes, who face a real reduction in their net disposable income.
By 5 April 2031, the personal allowance and basic rate limit will have remained unchanged for 10 years.
The freeze means that people on lower incomes face a real reduction in their net disposable income. In addition, more people are being brought into the income tax system. This means they face the administrative burden and complexity of interacting with the tax system. It also places a greater burden on HMRC’s resources. We use our briefing to call for additional funding for HMRC to ensure they can meet these extra demands.
Although not included in the finance bill, the government has announced its intention to ease the administrative burden for certain recipients of the state pension affected by the continued freeze of the personal allowance. The Chancellor has since confirmed that small tax liabilities owed by these state pensioners will not be collected.
We welcome measures that simplify administration, but request urgent clarification of this proposal, which now appears to extend beyond an administrative easement.