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last mo.

Frozen Personal Allowance Pushes 37.7 Million People into UK Income Tax

A stagnant £12,570 threshold since 2021 has failed to keep pace with inflation; rising state pensions have triggered fresh tax liabilities for retirees.

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Overview

  • HMRC figures show 37.7 million individuals paid income tax in 2024/25, marking a 6.2 million rise since 2019/20 and a 1.4 million increase year-on-year.
  • The personal allowance has been frozen at £12,570 since 2021/22 and will remain locked until 2028, leaving it £2,948 below its inflation-adjusted level.
  • Clare Stinton of Hargreaves Lansdown warns that this ‘fiscal drag’ stealthily expands the tax base and pushes modest earners into higher brackets.
  • Triple-lock state pension increases of 24% over three years have caused more retirees to cross the frozen threshold and incur new tax bills.
  • The Treasury rejected a proposal to raise the allowance to £20,000 on cost grounds, even as analysts call for a lift to the inflation-adjusted £15,518.