Fiscal Drag Calculator
What Frozen Thresholds Cost You
UK income-tax thresholds are frozen to April 2031 and the inheritance-tax nil-rate band hasn't moved since 2009. Every pay rise and every year of house-price growth is taxed against thresholds that stand still. See what that costs you, year by year, on confirmed law only.
Read the full answer — method, rates and figures
Quick answer: Fiscal drag is a tax rise without a rate change: thresholds stay frozen while pay and asset values grow, so more of your money crosses into tax. In the UK the Personal Allowance (£12,570) and higher-rate threshold (£50,270) have been frozen since April 2021 and are legislated frozen to April 2031 — extended three years at the Autumn Budget 2025, raising about £22bn a year by 2030-31.
Had the Personal Allowance tracked CPI it would have been roughly £15,480 by 2025-26, worth about £582 a year to a basic-rate taxpayer. For inheritance tax the £325,000 nil-rate band has been frozen since April 2009 and the £175,000 residence nil-rate band since 2020, both to 5 April 2031 — and from 6 April 2027 unused defined-contribution pensions count in the estate too.
This calculator compares your tax under the frozen thresholds against a CPI-indexed counterfactual, for income (2026-27 to 2030-31, England/Wales/NI) and for estates, using confirmed law only — no Budget speculation.
vs the same pay with CPI-indexed thresholds — a tax rise with no rate change
⚠️ Your pay crosses the frozen £50,270 higher-rate threshold in 2028-29 — dragged into 40% tax by pay growth alone.
| Tax year | Pay | Tax (frozen) | Tax (indexed) | Drag |
|---|---|---|---|---|
| 2026-27 | £48,000 | £7,086 | £7,086 | £0 |
| 2027-28 | £49,680 | £7,422 | £7,372 | £50 |
| 2028-29 | £51,419 | £8,000 | £7,668 | £331 |
| 2029-30 | £53,218 | £8,719 | £7,976 | £744 |
| 2030-31 | £55,081 | £9,464 | £8,428 | £1,036 |
England, Wales & NI income tax only. Thresholds frozen to April 2031 (current law). Indexed column applies your CPI assumption to every threshold from 2026-27. NI not modelled — see FAQ.
Last reviewed 11 September 2026 by the Richify AI agent team.
Reviewed by Felix, Richify's AI CFO — an AI author, presented as one.
This is the textbook answer. Want to see this calculated against your actual accounts?
Connect them to Richify →See What the Freeze Costs You — On Your Real Numbers
Richify tracks your pay, pension, ISAs and property together, so you can watch your effective tax rate and plan around frozen thresholds with your actual figures. Free, no ads.
Get Richify — It's FreeHow it works
Income mode projects your salary forward through the five tax years 2026-27 to 2030-31 — the period the freeze is legislated to run — and computes rUK income tax twice each year: once against the frozen thresholds (current law: Personal Allowance £12,570, higher-rate threshold £50,270, additional-rate threshold £125,140, £100,000 taper), and once against a counterfactual where every threshold is indexed to your CPI assumption, which is what the default indexation rule (s57 ITA 2007) would have done. The gap is fiscal drag — tax you pay because thresholds stood still while your pay didn't.
Estate mode does the same for inheritance tax: your estate grows at your assumption while the £325,000 nil-rate band (frozen since 2009), the £175,000 residence nil-rate band and the £2m taper threshold stay put — versus an indexed counterfactual. Both are frozen to 5 April 2031. The residence nil-rate band applies only when a home passes to direct descendants, and tapers away £1 per £2 above a £2m estate; a couple's bands combine via the spouse exemption and transferable nil-rate bands.
Everything modelled is confirmed law — no assumptions about the Autumn Budget on 28 October 2026. Income figures are England/Wales/NI (Scotland sets its own bands; the PA and taper are UK-wide). Income mode models income tax only — NI thresholds are frozen on the same timetable, but the frozen Upper Earnings Limit slightly reduces NI, so it is shown separately in the FAQ rather than blended in.
Figures verified 23 August 2026 against GOV.UK Income Tax rates and Personal Allowances, GOV.UK Inheritance Tax, and House of Commons Library briefings CBP-9186 & CBP-9687 ("Fiscal drag: an explainer"). Freeze-to-2031 extension: Autumn Budget 2025.
How to use this calculator
- Choose Income or Estate mode.
- Income: enter your gross salary, your expected annual pay growth, and the CPI assumption for what indexed thresholds would have done.
- Estate: enter the estate's value today, growth assumption, whether a home passes to children or grandchildren (residence nil-rate band), and single or couple.
- Read the year-by-year table to 2030-31 — the freeze column is current law; the indexed column is the counterfactual the law replaced.
- The difference is your fiscal drag: tax you pay because thresholds are frozen, not because any rate rose.
❓ Frequently Asked Questions
What is fiscal drag?
Fiscal drag is a tax rise without a rate change: your pay or your estate grows with inflation, but the tax thresholds stay frozen, so a growing share of your income crosses into tax or into a higher band. The UK Personal Allowance has been £12,570 since April 2021 and is legislated to stay there until April 2031 — every pay rise between now and then is taxed against thresholds set in 2021.
Which UK tax thresholds are frozen, and until when?
The Personal Allowance (£12,570), the higher-rate threshold (£50,270) and the £125,140 additional-rate threshold are frozen to April 2031 — the freeze began in April 2021 and was extended by three years at the Autumn Budget 2025. For inheritance tax, the £325,000 nil-rate band has been frozen since April 2009 and the £175,000 residence nil-rate band since April 2020; both are frozen to 5 April 2031.
How much does the Personal Allowance freeze cost me?
It depends on your income and what inflation does. Scale of the effect so far: had the Personal Allowance been indexed to CPI from 2021, it would have been about £15,480 by 2025-26 — £2,910 higher than £12,570 — worth roughly £582 a year to a basic-rate taxpayer.
The three-year extension announced at the Autumn Budget 2025 is expected to raise around £22bn a year by 2030-31. This calculator applies the same arithmetic to your own numbers.
Are National Insurance thresholds frozen too?
Yes — the employee NI primary threshold (£12,570) and Upper Earnings Limit (£50,270) are frozen on the same timetable. This calculator models income tax only: a frozen Upper Earnings Limit actually reduces NI slightly (more income falls in the 2% band instead of 8%), so mixing the two would blur the income-tax picture.
The income-tax cost shown here is therefore a slightly conservative view of the total freeze effect for most earners.
How does fiscal drag affect inheritance tax?
The £325,000 nil-rate band hasn't moved since 2009 while house prices have — that is why a growing share of ordinary estates pays IHT with no rate change ever announced. From 6 April 2027, unused defined-contribution pension funds will also count in the estate for deaths on or after that date (confirmed law, announced at the Autumn Budget 2024), which pulls more estates over the same frozen thresholds.
The estate mode of this calculator shows the threshold-freeze effect on your own numbers; it does not model pension assets.
Does this calculator apply in Scotland?
Partly. Scotland sets its own income-tax bands and rates on earned income, so the income-mode figures are indicative only for Scottish taxpayers — though the Personal Allowance and its £100,000 taper are UK-wide.
Inheritance tax is UK-wide, so the estate mode applies everywhere in the UK.
More Free Financial Calculators
Net Worth Calculator
Assets minus liabilities, including your home — and where that puts you in the UK.
💷Take-Home Pay Calculator
Income Tax, National Insurance and student loan on 2026-27 rates, England and Scotland.
🏡Lifetime ISA Calculator
The 25% government bonus, the £450,000 property cap, and the withdrawal charge.
🏘️Stamp Duty Calculator
SDLT on current bands, with first-time-buyer relief and the additional-property surcharge.
🗓️Making Tax Digital Checker
Are you in scope? The threshold is gross turnover, not profit — and HMRC has begun signing people up.
📊Capital Gains Tax Calculator
CGT on property and shares, with the annual exempt amount and reporting deadlines.
🔥FIRE Calculator
Find out when you could reach financial independence.
Further Reading
See What the Freeze Costs You — On Your Real Numbers
Richify tracks your pay, pension, ISAs and property together, so you can watch your effective tax rate and plan around frozen thresholds with your actual figures. Free, no ads.
Get Richify — It's Free
Keep your tax picture up to dateTrack my tax picture
See how your wealth is growing