The tax threshold freeze imposed by the Conservatives may continue under Labour, after Prime Minister Keir Starmer repeatedly refused to commit to ending the policy in 2028 as previously promised. The freeze has already dragged 4 million workers into higher tax brackets since 2021 through fiscal drag.
During heated PMQs exchanges, Starmer would only say Labour remains “committed to our manifesto” when pressed on the tax threshold freeze. The document pledged no rises in income tax, NI or VAT rates – but was silent on threshold adjustments.
Chancellor Rachel Reeves had previously called extending the freeze “unfair,” but with £5bn in welfare U-turns and debt reduction targets looming, economists now expect the Treasury to maintain frozen thresholds until 2030 a £7bn annual “stealth tax.”
The ambiguity over the tax threshold freeze has sparked discontent among Labour backbenchers, with some MPs warning it contradicts the party’s pledge to ease cost-of-living pressures.
Conservative leader Kemi Badenoch warned extending the tax threshold freeze would create a “retirement tax,” pushing 1.6 million pensioners into income tax for the first time as state pension rises outpace static allowances. An average full-time worker could also pay £1,000 more annually by 2030 through bracket creep.
Badenoch accused Starmer of “flirting” with a wealth tax after left-wing MPs proposed a 2% levy on assets over £10m. The PM dismissed “taxing our way to growth,” but avoided outright rejection – fueling speculation it remains an option for November’s Budget.
With Labour’s fiscal rules requiring debt reduction by 2029, analysts say the tax threshold freeze now appears the most likely revenue tool. As Starmer told MPs: “No chancellor writes a Budget in advance” – leaving millions in limbo over their future tax bills.
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