8 million could be worse off by 2030 – even if wages go up

More than 8 million people could end up worse off by 2030 - even if their pay keeps rising.

That’s according to the government’s own experts – the Office for Budget Responsibility (OBR).

In a new report, they warn that millions of people will be dragged into higher tax brackets because of something called fiscal drag.

It sounds complicated, but here’s what it means.

What is fiscal drag?

Since 2021, the amount you can earn before paying tax has been frozen.

So when wages go up – even just a little – more of your income could be taxed. You might even get pushed into a higher tax band.

You don’t have to be a high earner. Lots of people are being affected just by normal pay rises.

And with tax bands frozen until 2028, this could keep happening for years.

What caused it?

Back in 2021, the then-Chancellor Rishi Sunak froze income tax thresholds to help cover the cost of the pandemic.

That freeze has stayed in place ever since – even as prices have risen and wages have gone up.

Normally, these thresholds rise with inflation. But freezing them means more people are paying tax. And some are paying more of it.

The OBR says by 2029–30, around 41.1 million people will be paying income tax. That’s 8.3 million more than if the thresholds had gone up as usual.

And many of those people will be paying at higher rates too.

Why it matters

Wages are rising – but so is the cost of living. And if more of your pay is being taxed, you might not feel any better off.

In fact, you could be left with less in your pocket.

Experts say this is one way the government is raising money without increasing the main tax rates – which is why it’s often called a “stealth tax”.

What the government says

The Treasury says it’s sticking to the plan. The freeze will end in 2028–29.

They’ve also promised not to raise the main rates of income tax, national insurance, or VAT.

But even with that, the UK’s overall tax burden is heading for its highest level in 75 years.

What you can do

This might feel out of your control – but there are still a few things worth checking:

• Check your payslip – has your take-home pay changed?
• Look at your tax code – is it right for your circumstances?
• Reach out for support – if you’re feeling the pressure, you’re not alone.

We’re here to help

If rising taxes and higher costs are making it hard to stay on top of things, we can help.

We’ll work with you to take control of your money, make it go further, and feel more confident about the future.