What did Badenoch mean about ‘freezing’ tax thresholds?published at 13:20 GMT 19 November
13:20 GMT 19 November
By Nicholas Barrett and Anthony Reuben
At PMQs, Conservative leader Kemi Badenoch quoted Chancellor Rachel Reeves’ Budget speech from last year in which she said:
“I am keeping every single promise on tax that I made in our manifesto. So there will be no extension of the freeze in income tax and National Insurance thresholds.”
Badenoch asked: “Why was freezing thresholds a breach of the manifesto last year but it isn’t this year?”
There have been reports that Reeves may now choose to keep them frozen and the Tory leader asked the prime minister to rule this out – which he did not do.
Freezing income tax and National Insurance thresholds is widely regarded as a tax rise because of a process called “fiscal drag”, which sees more people start paying taxes or moving into higher rate tax bands as their wages rise.
These thresholds were frozen by two Conservative chancellors (Rishi Sunak and then Jeremy Hunt) and are in place until April 2028.
Labour’s 2024 election manifesto pledged that the party “will not increase taxes on working people, which is why we will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT”, but it did not mention thresholds.
A further freeze to tax thresholds would not mean raising individual tax rates but it would eventually mean raising more in tax from working people.