Since Andy Burnham took control of the Labour party, there has been a lot of chatter about the potential for the new Prime Minister and his Chancellor of the Exchequer, John Nealey, to announce an unfreezing of the PAYE tax bands. But how has the freezing of PAYE tax bands affected our take home pay?
Annual Income: Under £50,270
Your PAYE tax bands have essentially been frozen since April 2019, when the tax free allowance reached £12,500, although there was a minor increase to £12,570 in April 2021. For simplicity, I’ll be ignoring the minor £70 increase in the below table. The three increases from 2017 through to 2019 averaged a 4.33% increase each year, so how much tax-free allowance would you be enjoying right now if the increases had continued at that rate?
| Financial Year | Tax Free Allowance at continued 4.33% growth (nearest £) |
| 2020/21 | £12,500 x 1.0433 = £13,041 |
| 2021/22 | £13,606 |
| 2022/23 | £14,195 |
| 2023/24 | £14,810 |
| 2024/25 | £15,451 |
| 2025/26 | £16,120 |
| 2026/27 (this year) | £16,818 |
For an employee earning under £50,270 a year, you would be paying roughly £863.60 a year less tax in the financial year 2026-27 if the PAYE tax bands hadn’t been frozen in 2020. Kind of dwarfs the £45 per year saving on energy bills that Mr Burnham has given us by removing VAT on electricity.
Interestingly, you have paid an estimated £3,308 extra in PAYE taxes over these 7 years than you would have done if the bands weren’t frozen!
Realistically, if they unfreeze our tax bands from the coming April, they will not play catch up on the missed years. Instead, we’d start somewhere close to the first increase in the table above, moving to around £13,041 if we are lucky. This would give us an extra £108 a year in our bank accounts, roughly £9 a month. It’s not a lot, but again when compared to the £45 per year VAT relief on electricity, which is roughly £3.75 per month, an unfreezing of your tax bands is multitudes better.
Annual Salary: £50,271-£150,000
If you’re a member of the 20% of the country that earns more than £50,271 a year, then you’d see even more benefit from a system of unfrozen tax bands. Obviously, you’d have all of the benefit of the nil-rate tax band movements described above, but you’d also see the higher-rate tax bands move at a similar pace, rising by about 4.33% per year which would mean you have more income getting taxed at 20% rather than 40%. Here is how the higher rate tax bands could have increased if they weren’t frozen in 2020 and had a continued average growth of 4.33% over the last few years:
| Financial Year | Higher-rate Tax Threshold at continued 4.33% growth (nearest £) |
| 2020/21 | £50,270 x 1.0433 = £52,447 |
| 2021/22 | £54,718 |
| 2022/23 | £57,089 |
| 2023/24 | £59,559 |
| 2024/25 | £62,138 |
| 2025/26 | £64,828 |
| 2026/27 (this year) | £67,635 |
For an employee earning £70,000 a year, you would be paying roughly £3,302 a year less PAYE tax! To be honest, higher rate tax bands were growing faster than the nil-rate tax bands, so it’s likely you’d be paying even less tax if we didn’t have the freeze in place.
If Healey and Burnham announce an unfreezing from April 2027, you’d be around £544 a year better off immediately, or roughly £45.30 a month!
Take Two Minutes to Help Inform Burnham and Healey
I’ve started a petition, informing our new Prime Minister and Chancellor that we want our tax bands unfrozen from April 2027. We’ve already reached almost 14,000 signatures (date of writing: 4 August), but I think this will hit home a lot harder if we can get it to 50,000 by the time parliament returns from the summer break. So please, take 2 minutes to sign the petition if you haven’t already.
Please also share this article around, share the petition around, try your best to gather more signatures and we may be able to make a real difference here.
It’s time to up date our our tax threshold . You are taxing old age pensioners to death . This not the Labour government I supported of old .
Well, I’m sure we’d all like to pay less tax, but I’m equally sure that we’d all like a decent health service, good education for our youngsters, decent infrastructure (potholes filled in, etc.), good provision for the less well off, decent care for the infirm and elderly, armed forces that could actually defend us . . . etc. – all of which has to be paid for somehow.
Do not expect anything radically different from this PM & Chancellor,other than a bit more window dressing.