Announced policy to 2030-31¶
Budget 2025 threshold freezes¶
Budget 2025 keeps the income tax personal allowance and basic rate limit, and the equivalent National Insurance thresholds, at their current levels until April 2031. Finance Act 2021 s.5, as amended by Finance Act 2023 s.5 and Finance Act 2026 s.10, fixes the personal allowance at £12,570 and the basic rate limit at £37,700 for 2022-23 to 2030-31. The model holds the primary threshold and lower profits limit at £12,570, the upper earnings limit and upper profits limit at £50,270, and the secondary threshold at £5,000 a year through 2030-31. For Class 1, regulations set only the 2026-27 amounts; the later years are announced policy. The Class 4 limits are standing figures in SSCBA 1992 s.15(3). The lower earnings limit is not frozen: it rose with CPI to £129 a week in 2026-27.
From 2031-32 the model indexes these thresholds by September CPI, in create_threshold_indexation.py. The personal allowance and basic rate limit follow Income Tax Act 2007 ss.57 and 21 year by year: each rises by the CPI increase to the previous September, with the allowance’s increase rounded up to a multiple of £10 and the limit rounded up to a multiple of £100. The government says the National Insurance thresholds will also be uprated by September CPI after 2030-31 (Explanatory Memorandum to SI 2026/231, para 5.1), and it has kept them aligned with income tax through the freeze (HMRC’s Budget 2025 policy paper on the threshold freeze; Explanatory Memorandum to SI 2026/231, paras 5.14 and 5.15). The model assumes the alignment continues, round-ups included: the primary threshold and lower profits limit equal the personal allowance, and the upper earnings and profits limits equal the higher rate threshold (the personal allowance plus the basic rate limit). It also assumes the secondary threshold rises by September CPI, unrounded; the Autumn Budget 2024 policy paper says only that it will be increased in line with CPI. None of these National Insurance rules after 2030-31 is law.
2025 reforms¶
Autumn Budget 2024¶
The government increased the employer National Insurance rate from 13.8% to 15% and reduced the employer secondary threshold from £9,100 to £5,000 annually, both taking effect in fiscal year 2025-26.
Universal Credit rebalancing¶
Parliament passed legislation to implement Universal Credit rebalancing reforms, with the rebalancing switch activated in fiscal year 2025-26. The reforms include graduated standard allowance uplifts above inflation: 2.3% in 2026-27, 3.1% in 2027-28, 4.0% in 2028-29, and 4.8% in 2029-30. A new health element of £217.26 applies to most new claimants in fiscal year 2026-27, while existing health-element claimants keep the combined value of their standard allowance and health element at least in line with CPI.
Benefit uprating¶
Annual benefit uprating applied 4.1% increases to state pensions and 1.7% to working-age benefits, implemented through the standard uprating mechanism.
2024 reforms¶
Autumn Statement 2023¶
The government announced further National Insurance cuts, reducing the employee main rate from 10% to 8% and the self-employed Class 4 rate from 9% to 6% in fiscal year 2024-25. Class 2 National Insurance contributions were abolished for self-employed people, with the flat rate set to £0 in fiscal year 2024-25.
Capital gains tax changes (Autumn Budget 2024)¶
The government increased capital gains tax rates from 10%/20% to 18% for basic rate taxpayers and 24% for higher rate taxpayers for disposals from 30 October 2024 (Finance Act 2025 s. 7), part-way through 2024-25; the model day-weights that year between the two schedules and applies the new rates in full from 2025-26. Gains qualifying for Business Asset Disposal Relief or Investors’ Relief (capital_gains_badr) are charged at a separate rate that rises from 10% to 14% in fiscal year 2025-26 and 18% from 2026-27, up to a £1 million lifetime limit. Carried interest (capital_gains_carried_interest) is charged at a flat 32% from fiscal year 2025-26 (Finance Act 2025 s. 12); its move into income tax from 2026-27 is not modelled.
Spring Budget 2024¶
The government increased the child benefit high income tax charge threshold from £50,000 to £60,000 in fiscal year 2024-25. The higher rate of capital gains tax on residential property fell from 28% to 24% for disposals from 6 April 2024 (Finance (No. 2) Act 2024 s. 6); the basic rate stayed at 18%, and neither changed on 30 October 2024. These rates apply to the capital_gains_residential_property component of a person’s gains.
Autumn Statement 2023 (Employee NI cut)¶
An initial National Insurance cut reduced the employee main rate from 12% to 10% in fiscal year 2024-25.
2023 reforms¶
Autumn Statement 2022¶
The government reduced the additional rate income tax threshold from £150,000 to £125,140, taking effect in fiscal year 2023-24. The government also began reducing the capital gains tax annual exempt amount from £12,300 to £6,000 in fiscal year 2023-24, with a further reduction to £3,000 in fiscal year 2024-25.
2022 reforms¶
Spring Statement 2022¶
The government announced an increase in the National Insurance primary threshold from £9,880 to £12,570, aligning it with the personal allowance in fiscal year 2022-23.
Autumn Budget 2021 (Health and Social Care Levy)¶
The Health and Social Care Levy Act 2021 raised the employee main rate from 12% to 13.25% and the employer rate from 13.8% to 15.05% for fiscal year 2022-23. The Health and Social Care Levy (Repeal) Act 2022 restored 12% and 13.8% for earnings paid from 6 November 2022. The model reads each fiscal year’s rates at 30 April, so 2022-23 carries the levy rates for the whole year (#1807).
Mini-Budget 2022 (September)¶
The government announced increases to stamp duty nil rate thresholds, raising the main threshold from £125,000 to £250,000 and the first-time buyer threshold to £425,000.
Cost of living support¶
The government announced cost of living payments: £650 for means-tested benefit recipients, £300 for pensioners, and £150 for disability benefit recipients, implemented through dedicated payment calculation variables.
Energy Price Guarantee¶
Following the energy crisis, the government introduced an Energy Price Guarantee capping typical household bills at £2,500 in fiscal year 2022-23.
2021 reforms¶
Autumn Budget 2021¶
The government reduced the Universal Credit taper rate from 63% to 55% and increased work allowances by £500 annually in fiscal year 2021-22.
End of COVID-19 support¶
The government ended the Universal Credit £20 weekly uplift in fiscal year 2021-22, with rates reducing from the elevated 2020-21 levels.
Stamp duty holiday extension¶
The government extended the stamp duty holiday with phased withdrawal of the nil rate increases during fiscal year 2021-22.
2020 reforms¶
Summer Economic Update (July 2020)¶
The government introduced a stamp duty holiday with nil rates up to £500,000 in fiscal year 2020-21 to support the housing market.
COVID-19 response (March 2020)¶
Emergency measures included a £20 weekly increase to Universal Credit standard allowances and other working-age benefits in fiscal year 2020-21.
Current baseline (2025)¶
Key features:
Income tax: 20%/40%/45% rates with personal allowance of £12,570 and higher rate threshold of £50,270
National Insurance: 8% employee rate, 15% employer rate, 6% self-employed rate
Capital gains tax: 18%/24% main rates with £3,000 annual exempt amount; 14% on Business Asset Disposal Relief gains, 18%/24% on residential property gains and a flat 32% on carried interest
Universal Credit: 55% taper rate with rebalancing reforms active
Benefits: Standard uprating with targeted cost of living support for 2022
What is not modelled¶
Notable exclusions:
PIP reform announced in Autumn Statement 2023: The government announced reforms to Personal Independence Payment assessments and eligibility criteria, phasing out 25% of claimants between 2025-29. These reforms are defined as a scenario but not included in the baseline model
Non-domiciled taxation changes: Remittance basis abolition and four-year exemption regime from fiscal year 2025-26 are not modelled
Non-UK resident stamp duty surcharge: 2% additional rate from fiscal year 2021-22 is not modelled
Some devolved tax policies: Beyond property transaction taxes, other devolved policies may have limited coverage
All parameter values include references to primary legislation and can be found in the PolicyEngine UK parameters directory.