Workers handed major income tax update in Budget with millions affected

Workers have been handed a major tax update with millions affected. New Labour Party government Chancellor Rachel Reeves has confirmed she won't extend a freeze on tax thresholds in a surprise Budget move for millions of workers.

The current freeze on tax thresholds - the point at which you start to pay tax - is due to last until April 2028. It had been widely reported that the Chancellor could increase this by a further two years, until April 2030.

But she confirmed in her Budget today that she has decided against this. Malli Kini, a partner at the firm Blick Rothenberg, said: “This Budget is a 'kick in the teeth' to business owners/ entrepreneurs who take significant risks to grow their businesses by leaving funds in the business for growth and creating employment. The increased costs to employ staff and increased CGT rates will not incentivise current and future entrepreneurs to take risks that could lead to growth for the country.”

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Robert Salter, a director at the firm, said: “The increase in the National Minimum Wage from April 2025 to £12.21 means that small businesses have seen a 37% increase in the National Minimum Wage since the 2020/21 year. This is a significant real increase on the costs faced by businesses and could easily result in increased unemployment over time.

“The increase in the Capital Gains Tax rates – whilst expected – is quite likely to be counter-productive for the Government and lower their tax receipts in due course. The reality is that most capital gains transactions can be delayed by owners – or owners can simply move overseas – and the increase in CGT rates will just encourage such behaviour on the part of owners and entrepreneurs.

“The Government’s budget calls for more employees in a number of areas including teaching, SEND support, town planning and the wider building sector. However, the reality is that one cannot simply ‘pick up’ skilled staff in these areas and there doesn’t appear any real Government policy – at least this stage - to train and develop staff in these areas.”