It is easy to think that today's UK income tax rules have always been this way. They have not. The rates, bands, and allowances have changed dramatically over the past four decades, and the shape of the system today would have looked strange to a taxpayer in 1980.
This guide is a short, plain-English history of UK income tax since 1980, aimed at putting today's rates in perspective.
1980: Thatcher's starting point
At the start of the 1980s, the basic rate of income tax was 30 per cent, and the top rate on earnings was 60 per cent (with a 75 per cent rate on investment income until 1984). The personal allowance for a single person was £1,165 — around £4,500 in today's money.
The Budget of 1979 had already cut the top rate from 83 per cent, a post-war peak that dated back decades. The general direction for the next twenty years would be downward.
1988: A two-rate system
The 1988 Budget cut the basic rate to 25 per cent and simplified income tax to just two rates: basic 25 per cent and higher 40 per cent. This structure survived in near-identical form for more than 20 years, and it shaped how most of today's adults first learned about tax.
1999: The 10p starting rate
Gordon Brown introduced a 10 per cent starting rate in 1999. It aimed to reduce tax on low earners but was later abolished in 2008, a move that contributed to the political difficulties of that year. The starting rate for savings income (£5,000 at 0 per cent in 2026/27) is a distant descendant of this policy.
2010: The 50p rate and allowance taper
From April 2010, earnings above £150,000 were taxed at 50 per cent. The personal allowance was also tapered to zero for incomes above £100,000 — the same rule that still operates today. The 50p rate was reduced to 45 per cent in April 2013.
2013 to 2020: Rising thresholds
The personal allowance rose from £9,440 in 2013/14 to £12,500 in 2019/20, a significant real-terms giveaway. The higher-rate threshold also rose from £41,450 to £50,000 over the same period.
2021 onwards: The long freeze
In March 2021 the Chancellor froze the personal allowance at £12,570 and the higher-rate threshold at £50,270. The 2024 Budget extended the freeze to 2028, and the 2026 Budget extended it again to 2030. Over a decade, this alone is estimated to raise tens of billions of pounds in extra tax without any rate change appearing in a headline.
2023: The additional rate threshold drops
From April 2023 the 45 per cent additional rate was lowered from £150,000 to £125,140. Combined with the allowance taper, this means very high earners pay a higher effective rate than they did a decade ago even though the headline top rate is the same 45 per cent as in 2013.
Where it leaves us today
Compared with 1980, headline rates are dramatically lower. Compared with 2010, the effective tax position for middle and higher earners has steadily tightened. The personal allowance is at its highest real value of the modern era — but the freeze means that is changing quickly.
Use our UK salary calculator to see what your current bill would have looked like under older rules. The difference is often bigger than people expect.
The bottom line
UK income tax has moved from a small number of very high rates to a large number of moderate ones. Today's system has fewer "shock" rates, but it also has more quiet levers — the allowance freeze chief among them — that affect taxpayers without a new rate ever being announced.