The government will raise an extra £7.5bn by freezing the point at which people start paying income tax.

Chancellor Rachel Reeves has dropped plans to increase income tax rates, choosing instead to keep thresholds unchanged for two years.

Because wages are rising with inflation, more workers will end up paying more tax even though the tax rate itself is not changing.

Inside Labour, the move comes amid political tension and pressure on Keir Starmer’s leadership, adding to the budget’s sensitivity.

For ordinary people, this means that as their pay goes up, more of it will be taxed—leaving many households with less take-home income even without an official tax rise.