Tax expert Dan Neidle has outlined the potential impact of changing the personal tax allowance, after Prime Minister Andy Burnham said the idea had 'lodged in my mind'. The £12,570 threshold, frozen since 2021, has been blamed for dragging more low-paid workers into paying tax as wages rise with inflation.
Burnham's Doorstep Concern
In an interview with The Times, Burnham said the frozen allowance was 'the thing I heard the most on the doorsteps' during the Makerfield by-election campaign. Chancellor Rachel Reeves extended the freeze until 2031, bringing 920,000 people into the higher-rate band and 780,000 into paying income tax for the first time by 2030.
Neidle's Analysis on Peston
Appearing on ITV's Peston show, Neidle was asked by host Robert Peston whether unfreezing the allowance was the best way to help lower earners. Neidle replied: 'The personal allowance is attractive because almost everyone earning over £12,570 benefits. But because so many benefit, the cut is small. Using £5 billion would increase the allowance by about £500, giving basic-rate payers just £100 a year, or £2 a week.'
Peston then asked for a more efficient method. Neidle suggested: 'You could concentrate the money. For example, using £5 billion to cut employee national insurance by a penny would be worth £270 for someone on median income. But it's less valuable for those earning under £22,000, and worthless for pensioners who don't pay NI.'
Petition for £18,000 Allowance
A petition calling for the personal allowance to rise to £18,000 has gained nearly 40,000 signatures. If it reaches 100,000, it will be considered for parliamentary debate. The petition states: 'Since 2021 the allowance has been frozen. This freeze was due to end this year but has been extended to 2031. We want to keep more of our own money.'
The Treasury previously responded to the petition, saying: 'There are no plans to increase the Personal Allowance to £18,000. Doing so would cost over £40 billion per year, reducing tax receipts substantially and decreasing funds for hospitals, schools, and other essential public services. A £40 billion cut is equivalent to slashing roughly a fifth of the NHS budget in England or around two thirds of defence spending.'
The Treasury added that the government is supporting low-paid workers through the Low Pay Commission and free childcare offers.
