Autumn Budget 2024: income tax thresholds to rise from 2028

In the Autumn Budget 2024, the Chancellor confirmed there would be no increases to 'taxes on working people', keeping income tax, National Insurance and VAT rates the same.  

Rachel Reeves also made the more surprising announcement that income tax and personal National Insurance (NI) thresholds will start rising by inflation from the 2028-2029 tax year. Current income tax thresholds have been frozen since 2021-22 under a policy from the Conservative government, and it had been rumoured that the Chancellor might extend this freeze further to raise funds to cover the claimed £22bn 'black hole' in the nation's finances. 

Since income tax thresholds have been frozen, millions of workers are likely to have been dragged into higher tax bands as wages rise, something often referred to as 'stealth' tax. 

Here we reveal what the Autumn Budget tax changes mean for you and what else was announced. 

• Find out more: what was announced in the Autumn Budget 2024

What big tax changes did Reeves reveal? 

Here are all the big tax changes announced in the first Budget of the new Labour government – and, importantly, what hasn't changed. 

Income tax thresholds to rise in 2028-2029

Alongside maintaining income tax rates, Reeves also announced that from 2028-2029, income tax thresholds will rise in line with inflation. These thresholds mark the limit of what someone can earn before they move into the next tax band up. 

As it stands, tax bands have been frozen since 2021-2022 at the levels shown in the table. 

Although it's good news that the freeze now has an end date, it will still impact workers in the short term. 

According to the Office for Budget Responsibility, this prolonged freeze is expected to bring millions more into higher tax brackets by 2028-29. Nearly four million additional individuals will begin paying income tax, around three million more will shift to the higher rate, and an additional 400,000 will move into the top tax bracket.

• Find out more: income tax rates and thresholds 

Changes to National Insurance 

Personal National Insurance contribution (NIC) thresholds, which are the same as those for income tax, will also rise in line with inflation from 2028-2029. There are no planned changes to personal National Insurance rates.  

However, there are substantial changes to employer NICs – which employers pay on their employees' earnings. The employer NIC rate will rise from 13.8% to 15% from April 2025, and the per-employee threshold at which most businesses start paying NI on a worker's earnings will be lowered from £9,100 to £5,000. The government expects these measures to raise £25bn.  

While there is no direct impact of employer NIC increases on working people, prior to the Budget some critics suggested that such a change could have a knock-on effect on employees through employers offering lower pay increases or less generous employment benefits in future.  

• Find out more: how much tax you pay

Inheritance tax

Widely rumoured to make an appearance in the Budget, Reeves made several announcements on inheritance tax (IHT). 

Currently, the standard inheritance tax rate is 40% of anything in your estate over a £325,000 tax-exempt threshold. 

Reeves maintained the current inheritance tax threshold until 2030. This means the first £325,000 of an individual's estate can be inherited tax-free, rising to £500,000 if the estate includes a residence passed to direct descendants. 

However, Reeves did close a couple of IHT loopholes. First, unspent pensions will now be subject to inheritance tax from April 2027 – previously, pension pots have not formed part of someone's estate for IHT purposes. According to the government, this change will affect 8% of estates each year. 

Secondly, the Agricultural Property Relief and Business Property Relief will be reformed. From April 2026, the first £1m of business and agricultural assets will continue to attract no inheritance tax at all, but for assets over £1m, inheritance tax will apply with 50% relief at an effective rate of 20%.

Find out more: Autumn Budget 2024 pension changes

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What other tax changes were announced?

A range of additional tax changes were announced, including an extension to the fuel duty freeze and changes to alcohol duty. Meanwhile, capital gains tax (CGT) rates will rise on assets excluding residential property, meaning gains on all assets will now be taxed at the same rate, varying only by income tax threshold.

Reeves also reaffirmed the government's manifesto pledge to introduce 20% VAT on private school fees from January 2025.

• Find out more: Autumn Budget 2024 capital gains tax changes