£12,570. That's the amount UK workers can earn tax-free in the 2026-27 tax year — exactly the same figure as the previous four years.

HMRC has confirmed the personal allowance will remain frozen for a fifth consecutive year, according to Birmingham Live. The threshold was last increased in April 2021, when it rose from £12,500 to its current level.

What began as a temporary fiscal measure has become a stealth tax increase affecting millions of households. While the government hasn't technically raised income tax rates, the freeze means wage growth automatically pushes more earners into higher tax brackets — a phenomenon economists call "fiscal drag."

The Math Behind the Freeze

When the personal allowance was frozen in 2021, average UK wages stood at approximately £31,285, according to Office for National Statistics data. By 2026, median earnings have risen substantially, meaning a larger portion of workers' income is now subject to the 20% basic rate of taxation.

For someone earning £30,000 annually, the difference is tangible. Had the personal allowance risen with inflation from 2021 to 2026 — roughly 20% cumulatively over that period — it would now stand near £15,000. Instead, that worker pays tax on an additional £2,430 of income, costing them approximately £486 per year.

The impact multiplies across the UK's 32 million income tax payers. The Institute for Fiscal Studies estimated in 2024 that freezing thresholds would raise an additional £29 billion annually by 2027-28 compared to if they had increased with inflation.

Who Gets Hit Hardest

The freeze disproportionately affects workers whose wages have grown faster than inflation — often younger professionals, those who've received promotions, or workers in sectors with acute labour shortages.

It also pulls more people into the tax system entirely. Anyone whose income has risen from below £12,570 to above it since 2021 now pays income tax for the first time, even if their real-terms purchasing power hasn't meaningfully increased.

The higher rate threshold — the point at which earners start paying 40% tax — has also been frozen at £50,270 since 2021. This creates a second tier of fiscal drag, pulling middle-income earners into what was historically considered a tax bracket for high earners.

Historical Context

Tax threshold freezes aren't unprecedented, but the duration matters. Previous governments have occasionally paused increases for a year or two during fiscal crises. The current five-year freeze represents one of the longest periods without adjustment in modern UK tax history.

Between 2010 and 2021, the personal allowance rose significantly — from £6,475 to £12,570 — as part of a stated policy goal to lift low earners out of taxation entirely. The coalition government made raising the threshold a signature policy achievement.

The reversal of that trend marks a fundamental shift in fiscal policy, even if it's been implemented through inaction rather than active rate increases.

What It Means for Household Budgets

For a basic-rate taxpayer, every £1,000 of income above the personal allowance costs £200 in tax. With inflation having eroded purchasing power since 2021, many households find themselves paying more tax on income that buys less.

The freeze also interacts with other fiscal pressures. National Insurance thresholds have followed different trajectories, creating complexity in calculating actual take-home pay. Council tax has continued rising, and frozen fuel duty was finally increased in the 2025 budget after years of temporary freezes.

Combined, these measures mean the tax burden for median earners has increased substantially even as headline rates remain unchanged — a politically convenient approach that avoids the optics of announcing tax rises while achieving similar fiscal outcomes.

Looking Ahead

The Treasury has not announced when — or if — the personal allowance freeze will end. Chancellor Rachel Reeves has previously indicated that threshold freezes remain "under review" as part of broader fiscal planning, but has made no commitment to restoration of inflationary increases.

Some economists argue the freeze represents necessary fiscal consolidation after pandemic-era spending. Others contend it undermines work incentives and disproportionately burdens those least able to absorb effective tax increases.

For the 2026-27 tax year, the certainty is clear: £12,570 remains the number to remember — the same figure UK workers have been living with since 2021, and likely will be for some time to come.