Budget 2021: Income tax thresholds will be frozen until 2026, Chancellor of the Exchequer Rishi Sunak said today (3 March).
Setting out plans to help the UK recover from the £407 billion spent on Covid-19 (Coronavirus) support measures, he revealed the personal income tax allowance would rise with CPI as planned to £12,570 in April and remain at that level until 2026.
The higher-rate income tax threshold is set to increase to £50,270 next month and will remain frozen for five years.
National insurance (NI) and VAT rates will not go up, Sunak added.
Sarah Pennells, head of financial capability at Royal London, said: “The previous commitments made by government to avoid any further rises in tax and VAT have been maintained, and it’s welcome when the country needs to encourage growth in consumer spending.
“However, the freezing of the personal allowance and higher-rate threshold from 2022 will create additional higher-rate taxpayers.”
Andrew Harding, chief executive, management accounting, at The Chartered Institute of Management Accountants, believed the chancellor had addressed the “most pressing and immediate risks for the business sector in light of the incredibly challenging times”.
However, he added the government had “missed an opportunity to secure and stimulate employment by “not freezing employers’ NI contributions”.
“Such a measure would have helped bolster new job creation. In addition, we believe that the Chancellor should have included mandatory training as part of the income support scheme. The government has consistently missed this opportunity in previous announcements. Those receiving furlough won’t all return to their pre-pandemic jobs and action must be taken to ensure that they have the necessary skills to launch their new careers.”