Andy Burnham, the frontrunner to become the next Prime Minister, could make changes to the income tax Personal Allowance threshold to assist state pensioners, according to financial experts. Analysts also urge the new PM to continue building an investment culture and provide clarity on pension rules, while some fear higher wealth taxes may be introduced.
Personal Allowance freeze under review
The income tax Personal Allowance, currently set at £12,570, has been frozen since 2021 and is scheduled to remain unchanged until 2031 under plans set by Chancellor Rachel Reeves in the last Budget. However, Burnham has hinted at revisiting this threshold, particularly concerned about its impact on pensioners.
Sarah Coles, head of personal finance at AJ Bell, said: “Some suggestions of possible tax cuts have emerged in recent weeks. He hinted that he wants to revisit the income tax personal allowance. This is set to be frozen until April 2031, and while he hasn’t promised that as prime minister he would raise it, he does want to consider it. He is particularly concerned about its impact on pensioners.”
Inheritance tax and business rates also on the table
Coles added that the Inheritance Tax changes for farmers, already watered down since their initial announcement, could be reconsidered. Burnham has also suggested cutting business rates for pubs by 20% and raising the threshold for small businesses. While he did not commit to reversing the rise in employers’ National Insurance, he expressed sympathy for the idea.
Burnham has shown enthusiasm for taxing wealth more heavily, mentioning land as undertaxed and speaking about reforming council tax and stamp duty, which he describes as regressive. He has previously suggested reintroducing the 50p tax rate but declined to confirm whether that would be on the table if he becomes PM. Before the campaign, he had suggested scrapping inheritance tax and replacing it with a ‘care levy’ to fund a more integrated NHS and social care system, and he confirmed he would not be afraid to consider that idea again.
Triple lock commitment and investment culture
Coles stressed that Burnham has pledged to keep the state pension triple lock, which guarantees annual increases in state pensions. Anna Macdonald, Investment Strategy Director at Hargreaves Lansdown, urged that building on the investment culture is critical for the UK. Chancellor Rachel Reeves already made changes to Cash ISA rules for under-65s to encourage more savers to use stocks and shares ISAs.
Macdonald said: “From an investor’s perspective, the biggest difference between a good and bad outcome is policy, not personality. Whatever the next government looks like, policymakers need to keep building an investment culture and make it easier, not harder, for people to put their money to work. We've seen real progress in getting people investing higher up the policy agenda, and that momentum needs to continue to build a stronger retail investment culture in the UK. That means providing expected clarity on the Pension Schemes Act to encourage innovation and deliver value for money for consumers, while also supporting efforts to get more people investing and building greater financial resilience.”
