In this section: Every tax
Stealth taxes
Last updated . Figures refresh every night. How each figure is worked out.
"Stealth tax" is a name for a tax rise that does not look like one: no rate goes up, but more is paid. The biggest is the freeze on income tax and National Insurance thresholds. The Personal Allowance has been £12,570 since April 2021 and is fixed until April 2031. The OBR estimates the freezes raise £42.3bn in 2026–27, rising to £67bn by 2030–31, against thresholds that had risen with inflation. Cut allowances, withdrawn allowances that create marginal rates above 60%, and taxes collected from businesses and built into prices work the same way.
Figure as of 22 September 2026. Source: Office for Budget Responsibility.
Key figures
- £42.3bnRaised by the threshold freezes in 2026–27 (OBR estimate) up on a year earlier: +£8.9bn (+26.6%) vs 2025–26
- £12,570Personal Allowance Frozen since April 2021, until April 2031
- 4.88 millionExtra people paying income tax because of the freezes, 2026–27 up on a year earlier: +0.95m (+24.2%) vs 2025–26
- 74%Highest effective marginal rate in our examples Single parent of two, renting, on universal credit, at £51,000
Sources: Office for Budget Responsibility, HM Revenue and Customs, GOV.UK.
What is the short version?
- Who it reaches: the OBR counts 4.88 million extra income tax payers in 2026–27 and 3.39 million extra higher-rate payers.
- For one person: about £979 a year in extra income tax and National Insurance on a £35,000 salary.
- Cut allowances: the capital gains allowance has gone from £12,300 to £3,000 since 2020.
- Not new, and not hidden: governments of every party have used freezes, and the OBR costs each one in public at every Budget.
How can tax rise without a rate rising?
Figure as of 1 March 2026. Source: Office for Budget Responsibility.
Frozen since 6 April 2021. Source: Office for Budget Responsibility. Checked by hand 22 September 2026.
In force since 6 April 2024. Source: HM Revenue and Customs. Checked by hand 22 September 2026.
Figure as of 22 September 2026. Source: GOV.UK.
- Frozen thresholds12 thresholds held in cash, what they would be had they risen with prices, and what the OBR says they raise.
- Cut allowancesThe capital gains allowance cut from £12,300 to £3,000, the dividend allowance from £5,000 to £500.
- Hidden marginal ratesThe 60% band, the child benefit charge, the universal credit taper and student loans stacked on income tax.
- Taxes hidden in prices£176.0bn a year collected from businesses and built into what people pay.
- What the freezes cost a householdAbout £979 a year for someone earning £35,000, with the method shown.
Why do governments use them?
A rate rise is announced once, attracts a headline and has to be voted through as a change. A freeze is also announced and voted on, but its effect arrives gradually, as pay and prices rise past a fixed line, and it is spread across millions of people in small amounts. Governments of every party have used freezes: the inheritance tax nil-rate band has not moved since 2009, and the VAT registration threshold was held for seven years from 2017.
"Stealth tax" is a label, not an official term. The OBR calls the effect of freezes fiscal drag and costs it openly at each Budget, which is where the figures on these pages come from.
Where does the money go?
The extra income tax, capital gains tax and inheritance tax raised by freezes and cuts goes where those taxes always go: into the Consolidated Fund, the government's general account, with no earmark. Extra National Insurance goes into the National Insurance Fund, which pays the state pension and contributory benefits.
Income tax, capital gains tax, inheritance tax, VAT and duties
Consolidated Fund (general Treasury funds) the Consolidated Fund, with no earmark. National Insurance goes to the National Insurance Fund.
Exchequer and Audit Departments Act 1921, s2 (HMRC Trust Statement)
HMRC accounts for taxes, fines and penalties in its Trust Statement, prepared under section 2 of the Exchequer and Audit Departments Act 1921, and pays net receipts into the Consolidated Fund. National Insurance goes to the National Insurance Fund.
Legal position as of 22 September 2026. Source: legislation.gov.uk. Checked by hand 22 September 2026.
Are stealth taxes fair?
The case for using them
- Every freeze and cut is announced, legislated and costed by the OBR in public.
- A small rise spread across many people does less damage to incentives than a sharp rate rise on a few.
- Thresholds are not entitled to rise: uprating is a choice each Parliament makes.
- The alternative is a visible rise in a headline rate, or spending cuts of the same size.
The case against
- The rise compounds every year with no fresh decision to defend.
- People underestimate what they pay, which weakens the link between tax and consent.
- Withdrawn allowances create marginal rates of 60% and more in the middle of the income scale.
- Freezes bite hardest when inflation is high, which is when households are least able to absorb them.
Work out your take-home pay after income tax and National Insurance
Common questions
- What is a stealth tax?
- A tax rise that does not involve a headline rate going up: a threshold frozen while pay rises, an allowance cut, or a tax charged on businesses and passed on in prices. It is a popular name, not an official term.
- How much do frozen tax thresholds raise?
- The OBR estimates £42.3bn in 2026–27, rising to £67bn by 2030–31, compared with thresholds that had risen with inflation. The Personal Allowance has been £12,570 since 2021.
Sources for this page
| Source | Publisher | Figures as of | Updated | Licence |
|---|---|---|---|---|
| Office for Budget Responsibility, Economic and fiscal outlook, November 2025, Box 3.3 | Office for Budget Responsibility | 22 September 2026 | semiannual | Open Government Licence v3.0 |
| Economic and fiscal outlook, March 2026: detailed receipts tables | Office for Budget Responsibility | 1 March 2026 | semiannual | Open Government Licence v3.0 |
| HMRC tax receipts and National Insurance contributions for the UK | HM Revenue and Customs | the 2025–26 financial year | annual | Open Government Licence v3.0 |
| GOV.UK, Benefit and pension rates 2026 to 2027 | GOV.UK | 22 September 2026 | annual | Open Government Licence v3.0 |
| Capital gains tax annual exempt amount | HM Revenue and Customs | 22 September 2026 | annual | Open Government Licence v3.0 |
| legislation.gov.uk and official guidance, provision by provision | legislation.gov.uk | 22 September 2026 | annual | Open Government Licence v3.0 (legislation.gov.uk) |
Each source's figures are used under the licence shown. Our own words, analysis, charts and derived calculations are ours, under CC BY 4.0.