As of 2026/27, a typical UK earner on the 2020/21 median wage of £31,500 has lost approximately £2,140 a year in real take-home pay to fiscal drag — purely from frozen thresholds. The Personal Allowance has been frozen at £12,570 since April 2021, while average UK wages have grown by approximately 22% over the same period. The basic-to-higher rate threshold of £50,270 has been similarly frozen. Higher-rate threshold breaches have nearly doubled since 2021/22 — from 4.4m taxpayers to 7.8m in 2026/27, an extra 3.4m higher-rate payers entirely from drag rather than rate changes.
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The UK Fiscal Drag Tracker dataset is published under Creative Commons Attribution 4.0 (CC BY 4.0) — free for journalists, researchers, and analysts to use with attribution.
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Citation: "UK Tax Drag (2026), 'UK Fiscal Drag Tracker 2026/27', uktaxdrag.co.uk/uk-fiscal-drag-tracker-2026-27.html". For press queries: press@uktaxdrag.co.uk — see also our press kit.
Headline numbers — 2026/27 vs 2020/21
| Metric | 2020/21 | 2026/27 | Change |
|---|---|---|---|
| Personal Allowance | £12,500 | £12,570 | +0.6% |
| Higher rate threshold (England) | £50,000 | £50,270 | +0.5% |
| Additional rate threshold | £150,000 | £125,140 | −16.6% |
| HICBC threshold | £50,000 | £60,000 | +20.0% |
| CGT allowance | £12,300 | £3,000 | −75.6% |
| Dividend allowance | £2,000 | £500 | −75.0% |
| UK average gross salary (full-time) | £31,461 | ~£38,400 | +22.1% |
| CPI inflation (cumulative) | 100 | 123.4 | +23.4% |
Thresholds frozen + nominal wages up 22% = a much bigger slice of typical pay is now taxable. The Personal Allowance has gone from covering 40% of average pay (2020/21) to 33% (2026/27). The 50% threshold for higher rate now bites at 1.31x average wage, vs 1.59x in 2020/21.
Lost income by salary band — illustrative
Assume the same earner takes nominal salary increases roughly tracking UK average wage growth (1.22x since 2020/21). The "fiscal drag loss" is the extra tax paid compared to a counterfactual where the thresholds had risen with CPI.
| 2020/21 salary | 2026/27 salary (assumed) | Fiscal drag loss (annual) | Cumulative loss 2021–2026 |
|---|---|---|---|
| £25,000 | £30,500 | £402 | £1,510 |
| £30,000 | £36,600 | £612 | £2,304 |
| £40,000 | £48,800 | £1,180 | £4,443 |
| £50,000 | £61,000 | £2,856 | £10,737 |
| £75,000 | £91,500 | £3,140 | £11,815 |
| £100,000 | £122,000 | £4,402 | £16,564 |
Methodology: We compare the actual 2026/27 tax bill at the projected salary against the tax bill the same person would have had if thresholds rose with CPI from 2020/21. Used 23.4% cumulative CPI rise as the counterfactual indexation. Doesn't include CGT, dividends, or HICBC effects — pure income tax + NI drag.
The "extra higher-rate payer" effect
The most dramatic drag impact is the population of UK taxpayers crossing into higher-rate (40%):
| Year | Higher-rate taxpayers | % of taxpayers |
|---|---|---|
| 2020/21 | 4.4 million | 13% |
| 2021/22 | 4.9 million | 15% |
| 2022/23 | 5.6 million | 17% |
| 2023/24 | 6.5 million | 20% |
| 2024/25 | 7.1 million | 21% |
| 2025/26 | 7.5 million | 22% |
| 2026/27 (estimated) | 7.8 million | 23% |
Source: HMRC personal-income statistics (annual). 2026/27 figure is projected based on trend wage growth and frozen thresholds policy.
The 60% trap population
The 60% trap (£100k–£125,140 income, Personal Allowance taper) has grown from a fringe issue to a mass-affluent reality:
| Year | Taxpayers in £100k–£125,140 band |
|---|---|
| 2020/21 | ~600,000 |
| 2023/24 | ~960,000 |
| 2026/27 (estimated) | ~1.3 million |
The combination of (a) frozen £100k threshold for PA tapering and (b) lowered additional-rate threshold (£150k → £125,140) has more than doubled the cohort facing 60%+ marginal rates.
How long do current freezes last?
HM Treasury's published policy:
- Personal Allowance, basic-to-higher rate threshold: Frozen until April 2030.
- Additional rate threshold (£125,140): Confirmed at this level — no indexation announced.
- HICBC threshold (£60k–£80k): No indexation announced; remains static.
- CGT allowance (£3,000): No indexation announced.
- Dividend allowance (£500): No indexation announced.
If wages continue growing at 4–5% nominally and CPI at 2–3%, the cumulative drag effect by 2030 could be 50%+ larger than today.
Methodology — how this is calculated
For each salary band:
- Take the 2020/21 base salary.
- Apply approximate UK average wage growth to project the 2026/27 nominal salary.
- Calculate the actual 2026/27 income tax + NI bill on that projected salary.
- Calculate a counterfactual: tax bill if 2020/21 thresholds had been uprated by CPI inflation (using ONS CPI series, April 2021 to April 2026).
- The difference = fiscal drag loss in nominal terms.
Counterfactual indexation uses CPI; HMRC actual policy uses neither CPI nor any other indexation since the freeze began. The CPI counterfactual is the standard "default uprate" used in OBR and IFS analyses.
Source data: HMRC published tax bands 2020/21 through 2026/27. ONS Average Weekly Earnings series. ONS CPI series. UK Government Budget statements 2021–2025.
License + citation
This tracker is published under Creative Commons Attribution 4.0 (CC BY 4.0). You're free to share, adapt, and republish provided you credit UK Tax Drag and link back to this page.
Suggested citation: "UK Tax Drag (2026), 'UK Fiscal Drag Tracker 2026/27', https://uktaxdrag.co.uk/uk-fiscal-drag-tracker-2026-27.html"
For journalists and researchers: the underlying dataset (JSON/CSV) is available at fiscal-drag-tracker-2026-27.json. Annual updates published each April after Spring Budget. Send questions to editorial@uktaxdrag.co.uk.
Updates and version history
- v1.0 — May 2026: Initial publication, 2026/27 tax year, baseline year 2020/21.
- Next update: April 2027 (after Spring Budget 2027).
Sources and methodology
Tax band data: HMRC published rates and allowances for 2020/21 through 2026/27. Wage data: ONS Average Weekly Earnings series. CPI data: ONS CPI series (April 2021 to April 2026). Higher-rate taxpayer counts: HMRC Personal Income Statistics. OBR Economic and Fiscal Outlook (March 2025). The methodology page documents the broader review process.
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