The UK government’s decision to freeze the Personal Tax Free Allowance until 2031 is set to cost households an estimated £500 in lost relief, according to the Resolution Foundation thinktank. This freeze means that the standard Personal Allowance, currently at £12,570 for the 2026/27 tax year, will remain unchanged—ensuring no income tax is paid on earnings up to this threshold.
Tax rates stand at 20% for income up to £50,270, 40% for income between £50,271 and £125,140, and 45% for income above £125,140. By freezing the allowance, more families are pushed into higher tax brackets as wages and inflation rise, effectively increasing their tax burden.
The Resolution Foundation highlighted the ongoing cost-of-living crisis, exacerbated by volatile energy prices driven by geopolitical tensions in the Middle East. Even in the most optimistic scenario—where wholesale gas prices return to pre-war levels—energy costs are expected to climb by around £130 when the energy price cap is adjusted this July. Should gas prices remain at recent peaks, this increase could soar to approximately £440, pushing the cap to nearly £2,100.
Lalitha Try, an economist at the Resolution Foundation, emphasized that lower-income families bear the brunt of these challenges. “The cost of living crisis never ended for millions of households, and now a new wave of price shocks looms due to the conflict in the Middle East,” Try said. “Poorer families spend a larger share of their income on essentials like energy and food, making them especially vulnerable to inflation.”
While the government’s recent real-terms increase in Universal Credit offers some relief, Try urged ministers to introduce a social tariff to protect low-income households from ongoing and future energy price surges.