Fiscal drag calculator
Fiscal drag raises the share of income paid in tax when pay rises while thresholds stay fixed. Even a pay rise matching inflation can leave a worker paying more tax in real terms.
Budget changes: see the tracker.
The OBR's October 2026 forecast estimates that, compared with inflation-linked thresholds, 6.75 million more people will pay Income Tax and 5.42 million more will enter the higher-rate band in 2030-31. These are forecasts for different groups, not extra taxpayers to add together. See detailed receipts table 4.18 in the OBR workbook. This calculator uses its own historical, fixed-salary comparison through 2026-27.
How much extra tax and National Insurance do you pay?
Total extra paid across these six years at the same salary: (illustrative).
| Tax year and CPI index | Actual tax and NI | Tax and NI with raised thresholds | Extra paid |
|---|---|---|---|
| 2021-22 Prior September CPI: | Income tax: NI: | Income tax: NI: | |
| 2022-23 Prior September CPI: | Income tax: NI: | Income tax: NI: | |
| 2023-24 Prior September CPI: | Income tax: NI: | Income tax: NI: | |
| 2024-25 Prior September CPI: | Income tax: NI: | Income tax: NI: | |
| 2025-26 Prior September CPI: | Income tax: NI: | Income tax: NI: | |
| 2026-27 Prior September CPI: | Income tax: NI: | Income tax: NI: |
Notes on these figures
Each tax year uses the September CPI before it starts, relative to September 2020 at 109.1. The 2026-27 row uses September 2025 at 139.3 (ONS D7BT, checked 25 October 2026). September 2026 at 144.1 belongs to 2027-28, outside this calculator (ONS D7BT, checked 25 October 2026). The total includes changes to thresholds as well as freezes. A negative annual difference means less paid under actual thresholds than under the raised baseline.
Can tax rise without a higher tax rate?
Yes. When pay rises while the allowance stays fixed, more income becomes taxable. Crossing a band boundary also puts part of the increase into a higher-rate band. Neither requires a rate rise.
Which thresholds stayed frozen?
| Tax year | Personal allowance | Higher-rate threshold | Additional-rate threshold |
|---|---|---|---|
| 2021-22 | £12,570.00 | £50,270.00 | £150,000.00 |
| 2022-23 | £12,570.00 | £50,270.00 | £150,000.00 |
| 2023-24 | £12,570.00 | £50,270.00 | £125,140.00 |
| 2024-25 | £12,570.00 | £50,270.00 | £125,140.00 |
| 2025-26 | £12,570.00 | £50,270.00 | £125,140.00 |
| 2026-27 | £12,570.00 | £50,270.00 | £125,140.00 |
Check after the Budget on 28 October 2026Income Tax thresholds and annual NI inputs checked against HMRC on 25 October 2026. NI uses the director annual basis for years with changes during the year, so monthly payslips can differ.
How much extra tax do the annual examples show?
| Tax year | £30,000.00 salary | £60,000.00 salary | £120,000.00 salary |
|---|---|---|---|
| 2021-22 | £0.00 | £0.00 | £0.00 |
| 2022-23 | -£185.00 | -£32.95 | £572.00 |
| 2023-24 | £141.76 | £852.96 | £3,547.73 |
| 2024-25 | £448.20 | £1,810.40 | £5,925.42 |
| 2025-26 | £514.32 | £1,876.52 | £6,133.47 |
| 2026-27 | £667.62 | £2,029.82 | £6,615.76 |
Last updated: 25 October 2026.
How are the annual fiscal drag examples calculated?
The engine holds each entered salary fixed from 2021-22 to 2026-27. Each year compares recorded thresholds with thresholds raised using the previous September's Consumer Prices Index, or CPI. Both sides use that year's tax rates.
Why can an annual result be negative?
A negative amount means actual tax and National Insurance were lower than under the inflation-linked alternative. The 2022-23 National Insurance threshold increase produces that result at the £30,000 and £60,000 salary examples.
The comparison includes threshold changes as well as freezes. It also includes the additional-rate boundary's reduction from £150,000 to £125,140 in 2023-24, recorded by HMRC. Calling the entire difference the cost of one freeze would overstate what it measures.
Does the total describe my past payslips?
It describes a fixed-salary scenario. It does not follow your earnings history. Historical National Insurance uses annual approximations where rates or thresholds changed during a year, so pay-period calculations can differ.
The examples exclude Scottish Income Tax, benefits and student loans. Pension income needs a different calculation because these examples include employee National Insurance. The £100k tax trap guide explains the high-income allowance effect.
Last updated: 25 October 2026.
Why is fiscal drag called a stealth tax?
Frozen thresholds can raise the share of income paid in tax while headline rates stay unchanged. A pay rise that only matches inflation can still leave a larger tax bill in real terms. That is why the effect is often called a stealth tax.
Basic-rate taxpayers can be affected without entering a higher band. Keeping the tax-free allowance fixed removes the benefit they would have received from an allowance that rose with prices.
How long are UK tax thresholds frozen?
The November 2025 Budget extended the main threshold freeze to April 2031, covering tax years through 2030-31. For 2026-27, HMRC records a £12,570 personal allowance and an ordinary £50,270 higher-rate starting point in England, Wales and Northern Ireland.
The £100,000 allowance-taper entry point has its own longer history. Scotland's employment tax bands also differ. The threshold table above shows the recorded boundaries without treating them as one UK-wide salary schedule.
Can fiscal drag explain why people leave?
It explains part of a tax calculation. Measuring its effect on migration needs evidence about people's choices and the alternatives they faced. The named tracker records individual reports, while the Departures board keeps national series separate.
What else do readers ask?
What is fiscal drag?
It is the rising tax share when incomes increase while allowances and tax thresholds fail to keep pace.
Why is fiscal drag called a stealth tax?
A freeze can collect more tax without raising the headline percentage rates. A pay rise matching inflation can still increase the real tax burden.
When does the tax threshold freeze end?
The November 2025 Budget extended the main freeze through 2030-31, to April 2031. See the Budget tracker for announcements and effective dates.
Does this calculator show my past tax payments?
No. It compares a fixed nominal salary under recorded thresholds and a CPI-linked alternative. Historical employee NI uses annual approximations.
Sources
- HMRC: Income Tax rates and allowances: current and past, .
- HMRC: National Insurance contributions: current and past, .
- ONS: Consumer Prices Index: all items index, D7BT, .
- HMRC: Income Tax rates and allowances, .
- HMRC: National Insurance rates and categories, .
- OBR: Economic and fiscal outlook: November 2025, .
- HMRC: Tax structure and parameters statistics, .
- HMRC: Income Tax liabilities: bulletin commentary, .
- HMRC: Personal Allowances: adjusted net income, .
- HMRC: Income Tax liabilities statistics: 2023-24 to 2026-27, .
- OBR: The impact of frozen or reduced personal tax thresholds, .
- HM Treasury: Budget 2025 document, .
See the Budget tracker for announcements and effective dates.