LITRG: Extension of personal allowance freeze: unwelcome for many, but not unexpected 

26 Nov 2025

The Low Incomes Tax Reform Group (LITRG) has commented on the decision to freeze the personal allowance for a further three tax years from April 2028 to April 2031. 

The tax-free personal allowance has been frozen at £12,570 since April 2021. This freeze was already due to continue until April 2028. At today’s Autumn Budget, the chancellor confirmed this has now been extended until April 2031. The chancellor has also extended the freeze of all other income tax thresholds. 

Joanne Walker, LITRG Technical Officer, said:

“Extending the personal allowance freeze to April 2031 will mean more people on lower incomes are brought into tax as earnings rise and thresholds stay put. 

“It also means that those whose incomes are only just keeping up with inflation are paying a larger proportion of their income in tax. 

“From April 2026, workers earning the minimum wage will start to pay some income tax on their earnings after working around just 20 hours a week.”1 

Joanne Walker continued: 

“We are also concerned about the impact the continued personal allowance freeze might have on the increasing number of pensioners who will find they owe tax on their state pension income for the first time in the coming years. We expect that the full new state pension will exceed the personal allowance in 2027/28. 

“Some pensioners may be unaware that the state pension is taxable, as the DWP does not operate pay as you earn (PAYE) on it. For some, it can be worrying to receive an unexpected simple assessment tax demand from HMRC at the end of the tax year, and difficult to budget for the tax due. 

“We note that it was also announced in the 2025 Budget that the government will explore how they can reduce the administrative burden of simple assessment bills for state pensioners whose only income is the state pension. No further details are available at this stage.2 

“We feel this is an opportunity for HMRC to modernise the way the state pension is taxed for all state pensioners and make it easier for them to pay the tax they owe. 

“We have been calling on the government to bring the state pension into the PAYE system,3 so tax is taken off by the DWP before state pension payments are made, making the process much easier for pensioners.” 

Notes for editors 

  1. The national living wage is £12.71 from April 2026. Working for 50 weeks a year, 20 hours a week produces gross earnings of £12,710, which exceeds the personal allowance of £12,570. 
  2. See paragraph 4.167 of the Red Book 
  3. See the LITRG budget representation: LITRG recommends bringing the state pension into PAYE