Extend personal tax threshold freezes: note

Central fiscal result

-£12.4bn - Net fiscal impact in 2030-31

Low case: -£15.0bn. High case: -£7.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Models extend personal tax threshold freezes by 2030-31.
• Baseline is current policy or published departmental plans.
• Central case uses published party or official anchors where available.
• Wider manifesto interactions are excluded unless stated.

Affected population

• Affected units are people, firms, households or providers depending on policy.
• Direct exposure follows the manifesto or government target group.
• Indirect exposure includes suppliers, workers, consumers and taxpayers.
• Weakest counts are widened in the low and high cases.

Gross impact

• Published anchor or scenario central is +£12.4bn in 2030-31.
• Gross costs or receipts are adjusted for behaviour and delivery risk.
• Tax, benefit or procurement offsets are separated in the fiscal build-up.
• The range is deliberately wider where implementation detail is thin.

Fiscal build-up, central case

• Gross tax or receipt yield: -£15.5bn
• Behavioural and avoidance response: +£2.5bn
• Administration and compliance cost: +£0.1bn
• Other tax-base interactions: +£0.5bn

Central net impact: -£12.4bn in 2030-31.

Behaviour and pass-through

• Low case assumes stronger delivery or receipts than central.
• Central case applies moderate behavioural leakage and pass-through.
• High case allows weaker delivery, larger take-up or higher costs.
• Output effects follow incidence, capacity and investment channels.
• Distributional gains do not automatically imply GDP gains.

Phasing

• 2027-28: +£0.0bn. Phased implementation and take-up.
• 2028-29: -£3.1bn. Phased implementation and take-up.
• 2029-30: -£8.1bn. Phased implementation and take-up.
• 2030-31: -£12.4bn. Phased implementation and take-up.

Main source groups

• HM Treasury, "Budget 2025 policy costings" (2025): Costings provide scored fiscal impacts for the two-child limit, salary sacrifice and EV mileage charge; used where government costings exist.
• HM Treasury, "Budget 2025" (2025): Budget 2025 sets out implemented welfare, energy, motoring and tax-threshold measures; used for current government delivery policies.
• HMRC, "Direct effects of illustrative tax changes" (2025): Ready reckoners show direct tax-change effects but are approximate for large reforms; used to scale tax proposals cautiously.
• Kotlikoff and Summers, "Tax Incidence" (Handbook of Public Economics, 1987): The legal payer of a tax is not necessarily the person bearing its economic burden; supports incidence discussion across taxes.
• Mirrlees and review team, "Tax by Design" (Institute for Fiscal Studies, 2011): Efficient tax systems should avoid narrow bases and poorly targeted reliefs that distort decisions; useful benchmark for judging tax-base changes and exemptions.
• Labour Party, "Change: Labour Party Manifesto 2024" (2024): Used to define the pledge wording, policy scope and implementation scenario being modelled.