Tomorrow’s UK Budget 2025: The Numbers Behind Who Gains and Who Pays

On November 26, 2025, the Chancellor will stand up with one headline task: plug a fiscal hole running into tens of billions without breaking election promises on headline tax rates.

The trick will be simple and brutal. Tax more, quietly. Spend more, selectively. Hope people do not notice how much of the squeeze comes from the small print.

Behind the politics, the numbers tell a sharp story.

Bullet-Point Summary

• Income tax threshold freezes are forecast to raise around £40–45 billion a year by the end of the decade, roughly 3–4% of all tax receipts. Office for Budget Responsibility+2House of Commons Library+2
  
  

• Because of these freezes, about 4.2 million more people will pay income tax and around 3 million more will move into the higher-rate band by 2029/30, plus 600,000 extra in the top rate. House of Commons Library+2Positive Wealth+2
  
  

• On average, that stealth tax haul works out at roughly £1,100–£1,200 a year per taxpayer, though the real burden is much heavier at the top.
  
  

• A separate estimate suggests the median earner will be paying about £2,310 more in tax by 2030 purely because of the freezes, compared with a world where thresholds rose with inflation. The TaxPayers' Alliance
  
  

• State pensions are set to rise by about 4.8% in April 2026, taking the full new state pension to roughly £12,548 a year – almost touching the frozen tax-free allowance of £12,570. That pushes hundreds of thousands more pensioners into paying income tax. GB News+3MoneySavingExpert.com+3MoneyWeek+3
  
  

• Likely “winners”: low-income families with children, some first-time buyers, and many pensioners. Likely “losers”: middle and higher earners, owners of expensive homes, heavy cash savers, and people who rely on salary sacrifice schemes.
  
  

Background: The Fiscal Squeeze in Hard Numbers

More Taxpayers, Same Thresholds

The UK now has about 37.4 million income taxpayers, up from 33 million in 2021/22 – an extra 4.4 million people paying income tax in just a few years, largely because the tax-free personal allowance has been frozen. GOV.UK+1

For 2024/25:

• 29.5 million are basic-rate taxpayers.
  
  

• 6.3 million are higher-rate.
  
  

• 1.13 million pay the additional rate. GOV.UK
  
  

Frozen thresholds mean those numbers will climb further even if tax rates never change.

The Size of the Stealth Tax

The fiscal watchdog estimates that the income tax and National Insurance threshold freezes will:

• Raise around £42.9 billion a year by 2027/28, and about £44–45 billion by the end of the forecast period. Office for Budget Responsibility+2Office for Budget Responsibility+2
  
  

• By 2029/30, generate roughly £38.6 billion a year just from the freeze in the personal allowance and higher-rate threshold alone. House of Commons Library+1
  
  

Total tax receipts in 2024/25 are around £1.14 trillion, about 39% of GDP. House of Commons Library

That implies:

• Threshold freezes on their own are heading toward around 3–4% of all tax revenue, and about 1.4% of GDP – a huge hidden lever for any government.
  
  

Core Analysis: Who Gains, Who Pays – By the Numbers

How Many More People Pay Tax?

The freeze in the personal allowance and higher-rate threshold has a clear mechanical effect. By 2029/30, the forecasts suggest: House of Commons Library+2Positive Wealth+2

• 4.2 million extra people will pay income tax.
  
  

• 3 million extra people will pay the higher rate.
  
  

• 600,000 extra people will be pulled into the additional rate band.
  
  

With around 37–38 million taxpayers today, those 4.2 million new payers represent roughly an 11% increase in the number of people paying income tax. That is a big structural shift driven almost entirely by the freeze.

At the top end, more than 1 million people are already in the 45% tax band – far more than when the rate was introduced – and frozen thresholds mean many of them would not be in that band if the limits had kept pace with inflation. Financial Times+2MoneyWeek+2

Average Cost Per Taxpayer

Take one of the official uplift numbers: about £42.9 billion a year of extra revenue from threshold freezes by 2027/28. Office for Budget Responsibility+1

If the number of taxpayers stays around 38–39 million:

• Divide £42.9 billion by 39 million taxpayers.
  
  

• £39 billion would be £1,000 each.
  
  

• The extra £3.9 billion works out to about £100 per person.
  
  

That gives a rough average of around £1,100 a year per taxpayer in extra tax by the middle of the forecast.

Of course, the burden is not spread evenly. Higher earners and those pushed into new bands bear a much larger share than someone at the margin of the basic rate. But it shows just how powerful the policy is.

Impact on a Median Earner

One campaign group calculates that, if the freeze is extended further, the median-income earner could be paying about £2,310 more in tax by 2030 than if thresholds had moved with inflation. The TaxPayers' Alliance

Spread roughly across the years since the freeze began, that works out at an average of around £250 a year, but the pattern is back-loaded: the sting grows over time as wages rise while thresholds stay still.

For most working households, that is the difference between:

• A week or two of groceries each month,
  
  

• Or a serious dent in savings or debt repayments.
  
  

Who Benefits – With Some Concrete Figures

Low-Income Families and Children

If the Budget scraps the two-child limit on benefits and raises child-related support, the gains are immediate and measurable:

• Current research suggests removing the limit could lift hundreds of thousands of children out of poverty at a cost of several billion per year, depending on the exact design. The Independent
  
  

If even £5–6 billion of the threshold-freeze haul is channeled into child benefits, that would mean:

• Around 10–15% of the stealth tax revenue is being recycled into targeted poverty reduction.
  
  

Net effect:

• Families on low pay with three or more children could be several thousand pounds a year better off than under the current rules, even after indirect tax changes.
  
  

Pensioners Under the Triple Lock

The state pension is forecast to rise by about 4.8% in April 2026. MoneySavingExpert.com+2MoneyWeek+2

That takes the full new state pension:

• From around £230.25 a week to roughly £241.30 a week.
  
  

• That is about £12,548 a year, just £22 below the frozen personal allowance of £12,570. MoneyWeek+1
  
  

Consequences:

• Pensioners with even modest extra income – a small work pension, part-time earnings, or savings interest – will cross into the tax net.
  
  

• Estimates suggest hundreds of thousands more pensioners will start paying income tax over the next couple of years, while millions already in the net will pay more. MoneySavingExpert.com+2MoneyWeek+2
  
  

So:

• In raw cash terms, the triple lock makes many pensioners winners.
  
  

• In terms of tax status, it also turns more into small-scale taxpayers.
  
  

First-Time Buyers and Targeted Housing Help

If the Budget delivers modest stamp duty relief or other targeted housing measures:

• Even a 0.5–1 percentage point cut in transaction costs for first-time buyers on a £250,000 property is worth £1,250–£2,500 on the move.
  
  

• Spread across a 25-year mortgage, that equates to around £50–£100 a year in implied savings on the lifetime cost of buying.
  
  

Small in isolation, but meaningful when combined with other support or local schemes.

Who Does Not Benefit – And How Much It May Cost

Middle and Higher Earners

Middle and higher earners shoulder a disproportionate share of the stealth tax.

From the forecast that freezes will add 4.2 million new taxpayers and 3 million new higher-rate payers, you can sketch a rough ratio: House of Commons Library+2Positive Wealth+2

• About three in ten of those extra taxpayers end up in higher or additional rate bands.
  
  

If you assume those 3.6 million (3 million higher + 0.6 million additional) contribute even half of the £40+ billion uplift, that implies:

• An average extra burden of £5,000–£6,000 a year for this group alone by the late 2020s.
  
  

That is a broad-brush estimate, but it shows why professionals on £50,000–£100,000 plus feel the pinch so strongly.

Owners of Expensive Homes

Any move toward a “mansion-style” property tax or higher council tax bands for high-value homes would concentrate costs:

• Suppose a new band adds £1,000–£2,000 a year to the bills of the top 5–10% of properties by value.
  
  

• With roughly 28 million households in the UK, that hits 1.4–2.8 million households.
  
  

• That could raise £1.4–£5.6 billion a year, depending on design and take-up.
  
  

For those households, that is money that no longer goes into savings, renovations, or consumption.

Heavy Cash Savers and ISA Users

If the Cash ISA allowance is cut from £20,000 to around £12,000 for future years:

• High savers who currently fill the allowance each year lose £8,000 of new tax-free capacity annually.
  
  

• At an interest rate of, say, 4%, that is £320 of interest a year that would now be taxable rather than sheltered.
  
  

For someone close to the higher-rate band, that might mean:

• Roughly £128–£160 a year extra in tax just from that change, before any other tweaks.
  
  

What Economists Are Saying – Quantified

Economists and fiscal researchers focus on three numeric themes.

1. Tax Burden at Historic Highs

Total receipts at around 39% of GDP put the UK near its highest sustained peacetime tax take. House of Commons Library+1

With threshold freezes responsible for about a third of the projected rise in the tax-to-GDP ratio from 2019/20 to 2028/29, they see fiscal drag as the main hidden engine of this shift. Positive Wealth+1

2. Future Pain If the Budget Is Too Soft

If the Budget only half-closes the expected £20–30 billion fiscal gap, the shortfall does not disappear. It rolls forward into tougher future decisions:

• A later government might be forced into sharper tax hikes, deeper spending cuts, or both, to satisfy debt rules and market confidence. GB News+2Office for Budget Responsibility+2
  
  

3. Labor Supply and Work Incentives

OBR analysis links the threshold freezes to changes in work incentives:

• Higher effective marginal tax rates at key thresholds can discourage overtime and progression at the margin, especially where childcare and commuting costs bite. Office for Budget Responsibility+2Office for Budget Responsibility+2
  
  

The effect is subtle, but in aggregate it matters for growth – and therefore for future Budgets.

Why This Matters: Real-World Impact

For a Low-Income Family

• Gains: Higher child-related support or removal of the two-child limit could add thousands per year to disposable income.
  
  

• Losses: Slightly higher indirect taxes and small price rises.
  
  

• Net: Likely better off, especially if one parent is out of the income tax net altogether.
  
  

For a Median Earner

• Extra tax from freezes: roughly £2,310 by 2030, cumulative, compared to uprated thresholds. The TaxPayers' Alliance+1
  
  

• Extra council or “sin” taxes: a few hundred pounds a year.
  
  

• Any new support: limited, unless targeted at their specific circumstances.
  
  

Net: a slow, grinding squeeze on take-home pay.

For a Comfortable Professional Household

• Stealth tax from thresholds: potentially several thousand pounds a year by the late 2020s.
  
  

• Risk of higher property-related taxes if they own a high-value home.
  
  

• Reduced benefit from salary sacrifice or generous workplace perks.
  
  

Net: clear net losers, even if public services improve.

For Pensioners

• Triple lock gain: about 4.8% more state pension in April 2026, worth several hundred pounds a year. MoneySavingExpert.com+2MoneyWeek+2
  
  

• New tax obligations: more pensioners crossing into the tax net; many paying income tax for the first time or paying more on modest extra income.
  
  

Net: cash gain, but more complexity and rising effective tax exposure.

The Big Picture

Tomorrow’s Budget is not just a set of line items. It is the next step in a long, quiet reshaping of the tax system:

• More people paying income tax.
  
  

• More people in higher bands.
  
  

• A growing share of receipts coming from thresholds and technical tweaks rather than headline rate hikes.
  
  

The winners are those in greatest need: low-income families, some renters and first-time buyers, and pensioners protected by the triple lock. The losers are those who sit in the broad middle or upper-middle of the income distribution and those with significant assets.

The big question is whether this shift buys something lasting: better public services, higher investment, and finally stronger productivity. If it does not, the country may face the same hard sums again in a few years, only with fewer easy levers left to pull.

Statistical analysis used: descriptive statistics and simple scenario arithmetic based on published aggregate figures (per-capita averages, percentage shares, and illustrative distributional estimates); no regression or advanced econometric modeling.