Fiscal drag could cost millions of earners thousands – what is it, and how can I protect my money?

Income tax thresholds have been frozen until at least the 2027/28 tax year, forcing millions into paying more tax as their wages rise with inflation. What is fiscal drag, and how can you protect your money from it?

HMRC office
(Image credit: John Lamb via Getty Images)

Income tax thresholds have been frozen since the 2022 tax year, and will stay the same until the 2027/28 tax year.

In the 2021 Budget, then-chancellor Rishi Sunak announced income tax brackets would not be adjusted yearly, as had been the norm, for four years. Jeremy Hunt subsequently extended the freeze for a further two years.

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Daniel is a digital journalist at Moneyweek and enjoys writing about personal finance, economics, and politics. He previously worked at The Economist in their Audience team.

Daniel studied History at Emmanuel College, Cambridge and specialised in the history of political thought. In his free time, he likes reading, listening to music, and cooking overambitious meals.