Policy paper

Income Tax: Maintaining the Personal Allowance and the basic rate limit for Income Tax, and equivalent National Insurance contributions thresholds until 5 April 2031

Published 26 November 2025

Who is likely to be affected

Income Tax, National Insurance contributions payers, employers and pension providers.

General description of the measure

The Personal Allowance (PA) and basic rate limit will be maintained at their current levels until 5 April 2031. This measure will set the PA at £12,570, and the basic rate limit at £37,700 for tax years:

• 2028 to 2029
• 2029 to 2030
• 2030 to 2031

The current legislative default is for the PA and the basic rate limit to increase in line with the Consumer Price Index (CPI) from 6 April 2028 onwards.

Changes to the PA will apply to the whole of the UK.

Changes to the basic rate limit and higher rate threshold, will apply to non-property, savings and dividend income (NPSD) in England, Wales and Northern Ireland, and to savings and dividend income in the UK.

The Scottish Parliament sets Income Tax rates and limits for Scottish taxpayers.

The Primary Threshold (PT) for Class 1 National Insurance contributions and Lower Profits Limit (LPL) for Class 4 National Insurance contributions will remain aligned with the Personal Allowance for Income Tax for these years.

The higher rate threshold (the PA added to the basic rate limit) will be £50,270 until 5 April 2031. The National Insurance contributions Upper Earnings Limit (UEL) and Upper Profits Limit (UPL) will remain aligned to the higher rate threshold at £50,270 for these years.

The Employers Upper Secondary Threshold for employees under 21 (UST) and the Employer’s (secondary) Class 1 contribution rates for Apprentices under 25 (AUST) are set at the same level as the UEL. Therefore, the UST and AUST thresholds will remain aligned to the National Insurance contributions UEL at £967 per week for these years.

Changes to the National Insurance contributions thresholds will apply to the whole of the UK.

Policy objective

This policy will contribute to raising the revenue needed to fund public services and maintain economic stability.

Background to the measure

This measure was announced at Budget 2025.

Finance Act 2021 fixed the PA and basic rate limit at their 6 April 2021 levels up to 5 April 2026. Finance Act 2023 maintained thresholds up to 5 April 2028.

Detailed proposal

Operative date

The measure will have effect from 6 April 2028 to 5 April 2031.

Current law

Section 10 of the Income Tax Act 2007 provides for the basic rate limit. The basic rate limit is indexed with CPI under section 21 of the Income Tax Act 2007.

Section 35 of the Income Tax Act 2007 provides for the PA. The PA is indexed with CPI under section 57 of the Income Tax Act 2007.

Section 5 of Finance Act 2023 disapplied the indexation requirements to fix the PA and basic rate limit at 2021 to 2022 levels until April 2028. Accordingly:

• the PA is set at £12,570 up to and including 2027 to 2028
• the basic rate limit is set at £37,700 up to and including 2027 to 2028

The higher rate threshold is equal to the PA added to the basic rate limit. As a result, the higher rate threshold is set at £50,270 up to and including 2027 to 2028.

The National Insurance contributions UEL and UPL are set at £50,270 for the 2026 to 2027 tax year.

The PT for Class 1 National Insurance contributions, LPL for Class 2 National Insurance contributions and LPL for Class 4 National Insurance contributions were aligned with the Personal Allowance for Income Tax for the 2022 to 2023 tax year from July 2022.

National Insurance contributions thresholds for future years have not yet been legislated, though the government has announced that most thresholds will be maintained up to and including the 2027 to 2028 tax year and will be legislated for via the annual setting of National Insurance contributions rates, limits and thresholds.

Proposed revisions

Legislation will be introduced in Finance Bill 2025-26 to maintain the PA for 2028 to 2029 at £12,570, and the basic rate limit for 2028 to 2029 at £37,700. These thresholds will remain at £12,570 and £37,700 until 5 April 2031, and the legislative default is that they would rise in line with CPI thereafter.

The National Insurance contributions UEL and UPL will remain aligned to the higher rate threshold at £50,270 until the 2030 to 2031 tax year.

The National Insurance contributions UST and AUST thresholds will remain aligned to the National Insurance contributions UEL at £967 per week up until the 2030 to 2031 tax year.

The PT for Class 1 National Insurance contributions and LPL for Class 4 National Insurance contributions will remain aligned with the Personal Allowance for Income Tax until the 2030 to 2031 tax year.

National Insurance contributions thresholds will be legislated for in the annual setting of National Insurance contributions rates, limits and thresholds as standard.

Summary of impacts

Exchequer impact (£ million)

2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030	2030 to 2031
—	—	-30	+3655	+8395	+13360

These figures include the fiscal impact of two measures:

• Personal Tax: Maintain the Personal Allowance and basic rate limit for Income Tax and equivalent National Insurance thresholds at current levels for a further three years until 5 April 2031
• National Insurance: Maintain the secondary threshold for employer contributions at current level for a further three years until 5 April 2031

These 2 measures have been costed separately and the figures are set out in table 4.1 of Budget 2025 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2025.

Macroeconomic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

This measure is expected to bring 700,000 individuals into Income Tax by 2030 to 2031, compared to if these thresholds were indexed with CPI from 2028 to 2029 onwards.

Actual impacts for individual taxpayers will vary according to individual circumstances.

This measure is not expected to impact on family formation, stability or breakdown.

Equalities impacts

An individual may be affected by this measure regardless of their protected characteristics. This measure is expected to impact Income Tax and National Insurance contributions payers, including bringing people into tax. If a protected group is overrepresented in the Income Tax and National Insurance contributions paying population, then it will be disproportionately impacted.

The population impacted by this measure in 2030 to 2031 is estimated to have a slight overrepresentation of males (53%) compared to their representation in the UK adult population (50%). The age profile reflects the typical working age population, with slightly fewer individuals aged 16 to 24 or over 65 than in the overall UK adult population. Those over State Pension Age are estimated to make up around 20% of the impacted population in 2030 to 2031 compared to around 29% of the projected UK adult population. Notably pensioners do not pay employee or self-employed National Insurance contributions on their earnings or profits and will not be affected by maintaining the National Insurance contributions threshold.

Where data were available no other protected groups were estimated to be overrepresented in the population impacted by this measure.

Administrative impact on business including civil society organisations

There is no impact on businesses as this measure only affects individuals.

Operational impact (£ million) (HMRC or other)

HMRC will need to implement minor changes to IT systems to support safe implementation of this measure. These changes are expected to be implemented at minimal cost to HMRC.

Bringing additional customers into Income Tax will likely create additional demand for HMRC operations in the future.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

The measure will be monitored through information collected from tax receipts.

Further advice

If you have any questions about this change, contact the Income Tax Structure team by email: incometax.structure@hmrc.gov.uk.