Budget 2021: Pay cut for MILLIONS of hard-working Brits as Rishi Sunak FREEZES income tax

MILLIONS of hard-working Brits will be hit by a stealth tax rise from today's Budget.

The Chancellor Rishi Sunak announced a freeze to income tax thresholds,meaning Brits will no longer benefit from planned increases to the amount that can be earned tax-free.

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In his Budget today, Mr Sunak said the tax-free personal allowance – the amount you can earn before paying tax – will remain at £12,500.

For higher rate tax payers, the personal allowance will be held at £50,000.

Although Mr Sunak stopped short of increasing taxes, a freeze to these thresholds is essentially a pay cut, once you take into account the rate of inflation.

Mr Sunak said: "Nobody’s take home pay will be less than it is now, as a result of this policy.

What is the personal allowance?

THE personal allowance is an amount you can earn each year tax-free.

In the current tax year running from 6 April 2020 to 5 April 2021, that amount is £12,500.

You then pay between 20%-45% income tax depending on how much you earn.

  • Low earners: If you earn £12,500 or less, you pay no income tax
  • Basic rate: If you earn £12,501 to £50,000, you pay 20% tax
  • Higher rate: If you earn £50,001 to £150,000, you pay 40% tax
  • Additional rate: If you earn £150,000 or more, you pay 45% tax

Just keep in mind your personal allowance might be different if you're entitled to certain allowances or earn a lot of money.

The marriage allowance is a tax break where one partner in a married couple can transfer some of their unused personal allowance to another.

And people with sight issues can get the blind person's allowance which increases this tax-free amount.

And anyone who earns over £125,000 doesn't get any tax-free personal allowance – they will pay income tax on everything they earn.

"But I want to be clear with all Members that this policy does remove the incremental benefit created had thresholds continued to increase with inflation.

"We are not hiding it, I am here, explaining it to the House and it is in the Budget document in black and white. It is a tax policy that is progressive and fair."

The Chancellor promised to implement the planned personal allowance risenext year, which will see it go up to £12,570 for basic tax payers and up to £50,270 for higher rate tax payers.

The personal allowance will then be held at these rates until April 2026.

Basic rate tax payers pay 20% on earnings over the lower threshold, while higher rate payers are charged 40% above the £50,000 threshold.

The Government had previously set out plans for the thresholds to increase in line with inflation.

This would have taken the personal allowance to £13,310 and the higher rate tax threshold to £53,410 by the end of the current parliament in 2024.

The thresholds for income tax generally rise each year so that people can earn more without paying more tax.

It means someone on a £30,000 a year salary will pay £14 a month more in 2021/22.

Without the rises, it's estimated the average working family is missing out on £250 a year by 2024, or £150 for a single basic-rate taxpayer.

The freeze is expected to bring in around £6billion a year for the Treasury as it looks to cover the cost of coronavirus support.

You can follow all the latest from the Chancellor's Budget announcement on The Sun's live blog.

In his Budget, Mr Sunak also announced extra help for 600,000 self-employed Brits who have been shut out of Government support during the pandemic.

It means they will be able to access the £7,500 in extra help that others have been able to claim.

Furlough has also been extended and will continue to cover 80% of workers' wages.

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