How Frozen Tax Thresholds Could Reduce Your Profits in 2025/26
In the UK, tax thresholds that stay fixed during high inflation can quietly reduce business profits. When the government chooses not to raise tax bands while wages and profits rise, more people and companies are pushed into higher tax brackets. This happens even when tax rates don’t change. For businesses, this silent shift can mean higher tax bills, lower retained earnings, and slower growth. As we move toward 2025/26, it’s important to understand how unchanged thresholds may affect planning and performance. This guide explains the risk and offers practical steps to protect your profits. What Are Frozen Tax Thresholds? Frozen thresholds occur when tax bands remain the same instead of increasing with inflation. Because income and profits tend to rise over time, more of that income slips into higher tax bands. The result is a “tax rise” without headline changes to tax rates. For business owners, this affects: · ...