The Chancellor announced that the government would continue to freeze income tax thresholds until 2028.

The move will incentivize people to pay higher rates through a process known as a “tax brake.”

Rachel Reeves made the announcement as part of her budget earlier today, saying she wanted to protect workers’ money by not extending the freeze beyond 2028.

Charlene Young, pensions and savings expert at AJ Bell, previously described the decision to keep the tax threshold frozen as “akin to raising taxes through the back door”.

She said: “This was a tactic used by the Conservatives to raise taxes on working households, with rising wages at a time of high inflation creating a stealth tax on income.

“The effect is somewhat muted when wage increases are smaller, which is normal as inflation falls, but it is still an easy way to increase tax revenue.”

The Chancellor announced that from 2028/29 the thresholds would be increased in line with inflation.

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Simon Rothenberg, partner at Blick Rothenberg, said: “Rachel Reeves’ latest comment on tax was to say she was not going to freeze beyond the previous government’s decision, but given she has amended many of their decisions, she could very well I’ve stopped that now. However, she did not do so and, indeed, it will only take a year of increases before the next election. Four more years of budgetary restraint.

The fiscal drag is a direct result of tax thresholds not increasing in line with inflation and leads to people being lured into higher tax brackets and therefore paying more tax.

Mike Ambery, director of retirement savings at Standard Life, part of the Phoenix Group, said: “One of the biggest tax increase measures in recent years did not result from a tax rise but rather the decision to freeze income tax brackets at 2021/22 levels. The tranches had been frozen until the end of the 2027/28 tax year and it has been confirmed that they will now increase with inflation beyond this limit.