Fiscal drag (UK)
Fiscal drag means leaving tax thresholds frozen while wages and prices rise, so more income falls into higher bands without any rate change. The Autumn Budget 2025 extended the personal allowance and higher-rate threshold freeze to April 203130. The OBR estimates around 5 million extra taxpayers will be dragged into higher rates by 2030/3134.
The freeze timeline
- April 2021 – personal allowance frozen at £12,570 and higher-rate threshold at £50,270 (Spring Budget 2021).
- November 2022 – additional-rate threshold cut to £125,140; existing freezes extended to April 202832.
- November 2025 – freezes extended again to April 203130.
What the OBR forecasts
The OBR's March 2026 Economic and Fiscal Outlook shows the extended freeze raising tens of billions over the scorecard and pulling around 5 million extra payers into higher-rate or additional-rate bands by 2030/3134.
Which bands carry the drag
Most of the cash impact lands at the personal-allowance and 40% thresholds, because those catch the largest numbers of payers. The additional-rate threshold drag (£125,140) hits a smaller cohort harder per head.