Frozen Until 2031: What Fiscal Drag Does to a 30-Year Plan

Filippo Corbelli

8 hours ago

4 min read

Your tax thresholds are frozen until 5 April 2031, three years longer than Moola's projections assumed a week ago. We have corrected the engine, and this is what the extra three years do to the year your plan says you cross into higher rate.

Until last Wednesday, Moola held the UK income tax thresholds flat until 2027/28 and then let them rise with your plan's own inflation assumption. That was wrong. The law, as legislated at the Autumn Budget on 26 November 2025, holds them for three years longer than that. A projection built on the old assumption was quietly optimistic about every year from 2028/29 onward.

What we changed

The engine now treats the 2030/31 tax year as the last frozen one. The first year in which thresholds rise is 2031/32, and when they do rise, they rise with your plan's own CPI assumption rather than a hard-coded figure.

Four things are now held flat through 2030/31:

The personal allowance, at £12,570
The basic rate limit, at £37,700, which is what puts the higher rate threshold at £50,270
The additional rate threshold, at £125,140
The National Insurance primary threshold and upper earnings limit, at £12,570 and £50,270

This applies everywhere the projection touches UK income, not just to your salary line: lump sums, SIPP and salary sacrifice relief, automatic drawdown, the pension withdrawal scenario, severance, and the take-home to gross calculation that runs in reverse when you tell Moola what lands in your account rather than what you earn.

The law, precisely

The source is HMRC's policy paper Maintaining Income Tax and equivalent National Insurance contributions thresholds until 5 April 2031, published alongside the Autumn Budget on 26 November 2025.

It holds the personal allowance at £12,570 and the basic rate limit at £37,700 for 2028/29, 2029/30 and 2030/31. The Class 1 primary threshold and Class 4 lower profits limit stay aligned with the personal allowance; the Class 1 upper earnings limit and Class 4 upper profits limit stay aligned with the £50,270 higher rate threshold.

One end date, 5 April 2031, covers income tax and National Insurance alike.

That matters for a planning tool, because it means there is no clever split to model. Both move together, or neither moves.

Three extra frozen years is not a rounding error. It is the difference between a plan that says you are a basic rate taxpayer in 2030 and one that says you are not.

What three more years costs

Here is the arithmetic, with the assumption stated openly. Suppose the thresholds had instead risen with CPI at 2.5% a year from 2028/29. By 2030/31 the personal allowance would be roughly £13,540 instead of £12,570, and the higher rate threshold roughly £54,140 instead of £50,270.

For a higher rate taxpayer, that gap is worth about £1,160 a year in extra tax by 2030/31, and it does not go away afterwards. It compounds into every year of the projection that follows, because the bands start their climb from a lower base.

The sharper effect is on the year you cross a boundary. On a salary rising 3% a year, with the higher rate threshold stuck at £50,270:

£48,000 today crosses into higher rate in the 2028/29 tax year
£46,000 today crosses in 2030/31
£44,000 today crosses in 2031/32, and only just

Under the old assumption, the first of those three sat comfortably below the line for years longer. That is the kind of error that changes a decision, not just a chart: whether this year's bonus should go to the pension, whether salary sacrifice is worth the paperwork, whether the plan survives one partner going part time.

What Moola deliberately does not do

The Budget is on Wednesday 28 October 2026. The Chancellor could unfreeze the thresholds, extend the freeze again, or leave it alone. Moola will not guess which.

The engine models the law as legislated, never as rumoured. If the thresholds change on 28 October, we will change the engine that week and your projection will move. Until then, a plan that assumes a thaw nobody has announced is not a more optimistic plan. It is a less accurate one.

Three more honest limits, because they are the sort of thing a tool should say out loud:

The £125,140 figure is our choice, not the law's. The additional rate threshold has no statutory indexation at all. It is a fixed cash number that only moves when a Chancellor moves it. We let it rise with CPI from 2031/32 alongside the others, because a plan in which it stays at £125,140 for thirty years is implausible. But that is a modelling decision, and you should know it is ours.

The cash limits stay flat. The ISA allowance, the pension annual allowance, the £3,000 capital gains exemption and the £100,000 taper start are all held at today's figures for the whole projection. None of them has automatic indexation either, and we would rather show you a plan built on today's known limits than one built on our guesses about future generosity.

We do not know what happens after April 2031. CPI uprating from 2031/32 is the statutory default, which makes it the least speculative assumption available. It is still an assumption. You can change the inflation figure your plan uses and watch the whole band structure move with it, which is the honest way to hold a number you cannot know.

Before 28 October

Nothing in this post is a reason to act in a hurry. Two things are worth doing while the Budget is still three weeks away.

Check the year your plan now says you cross into higher rate, because for a lot of people it has just moved closer. If it lands inside the next two or three years, the pension and salary sacrifice arithmetic is worth a second look now, while you still have a tax year to work with.

And hold the rest. The Bank of England left Bank Rate at 3.75% on 17 September, with the next decision on 5 November, a week after the Budget. For anything rate-sensitive, there are two dates ahead of you, not one, and neither of them rewards guessing early.

Open your plan, change the inflation assumption, and see how much of your thirty years depends on a number the Treasury has already legislated and a number nobody has decided yet. That is a more useful hour than reading another Budget prediction.