A petition calling on Prime Minister Andy Burnham to raise the personal tax allowance to £18,000 has four weeks left to gather enough signatures for parliamentary debate consideration. The petition, open until September 30, has been backed by 63,000 people; if it reaches 100,000 signatures, it will be considered for a debate, which would pressure the government to set out its position and consider changes.
Fiscal drag and frozen threshold
The personal tax threshold of £12,570 has been frozen since 2021, meaning anyone earning above this limit is taxed. Critics say the freeze has created ‘fiscal drag’, causing many of the lowest-paid workers to pay more tax as inflation pushes wages up.
The petition, created by Mike Haynes, states: “Since 2021 personal tax allowance has been frozen at £12,570. This freeze was due to expire this year but the Chancellor of the Exchequer has extended it to 2031. We want to keep some more of our own money.”
“If you are earning minimum wage then you may soon be paying tax because of fiscal drag. Some higher earners pay little or no tax due to clever use of accounting rules. We think this is so wrong.”
Inflation-adjusted allowance gap
Former Chancellor Rachel Reeves extended the freeze to 2031 last November. Writing for the Institute for Fiscal Studies, Isaac Delestre said this month: “Had it been uprated in line with inflation since April 2021, the personal allowance would today stand at £16,070 – £3,500 higher than its actual level. By 2030–31, the gap between the personal allowance and where it would have been had it not been frozen will (under current inflation forecasts) reach £4,870. This represents a 22% real-terms reduction in the value of the personal allowance between 2021–22 and 2026–27, with a further 8% reduction expected by 2030–31.”
Treasury response and fiscal cost
The Treasury has responded to the petition, rebuffing any suggestion that the basic tax rate of 20% over £12,570 should be changed. Officials said: “The Government currently has no plans to increase the Personal Allowance to £18,000. Increasing the Personal Allowance to £18,000 would come at a significant fiscal cost of over £40 billion per year.”
“Raising the Personal Allowance to £18,000 would reduce tax receipts substantially, decreasing funds available for the UK’s hospitals, schools, and other essential public services that we all rely on. A £40 billion cut in public services is equivalent to slashing roughly a fifth of the NHS Budget in England, or around two thirds of defence spending.”
“The income tax system is highly progressive, with different rates of tax sitting above an internationally high Personal Allowance. The Government is making these fair and necessary choices on tax so it can deliver on the public’s priorities. Alongside this, the Government is keeping the contribution as low as possible by pursuing a programme of reform to fix longstanding issues in the tax system.”
