LONDON - Britain will freeze the amount of money that people can earn tax-free and also the threshold for the higher rate of income tax until 2026, finance minister Rishi Sunak said on Wednesday.
Sunak said that while a basic income tax rate of 20% and a higher income tax rate 40% would not be increased, the thresholds for the "personal allowance" of tax-free earnings and at which the higher tax rate kicks in would not rise with inflation.
Sunak said that the freeze was part of an approach to fix public finances as he looks for ways to raise funds following unprecedented measures to support jobs and the economy during the coronavirus pandemic.
"This government is not going to raise the rates of income tax, national insurance or VAT. Instead our first step is to freeze personal tax thresholds," Sunak told parliament.
"We will, of course, deliver our promise to increase (the personal allowance) again next year to 12,570 pounds ($17,545) but we will then keep it at this more generous level until April 2026."
He added that the higher rate threshold would also increase next year to 50,270 pounds, as previously promised, but would then also be frozen for the same length of time.
The personal allowance threshold and higher rate threshold in England and Northern Ireland had previously been 12,500 pounds and 50,000 pounds a year respectively.
"Nobody's take home pay will be less than it is now as a result of this policy," Sunak said.
"But I want to be clear... that this policy does remove the incremental benefit created had thresholds continued to increase with inflation."
($1 = 0.7164 pounds)
(Reporting by Alistair Smout and David Milliken, editing by Elizabeth Piper and James Davey) ((alistair.smout@thomsonreuters.com; +44 207 542 7064; Reuters Messaging: alistair.smout.thomsonreuters.com@reuters.net))
