HM Treasury has rejected calls to raise the tax-free Personal Allowance to £18,000, arguing that such a move would cost over £40 billion per year and disproportionately benefit higher earners. The response comes after a petition launched by Express reader Mike Haynes gathered more than 38,000 signatures in months, urging new Prime Minister Andy Burnham to prioritise an increase.
The Personal Allowance, currently set at £12,570, has been frozen since 2021. Chancellor Rachel Reeves extended the freeze until 2031, meaning the threshold will remain unchanged for a decade. Adjusted for inflation, the 2019 threshold of £12,500 is worth approximately £16,215 in 2026, effectively dragging more workers into paying income tax through fiscal drag.
Petition demands action on tax-free allowance
Mike Haynes, 64, a warehouse forklift instructor from Axminster, Devon, launched the parliamentary petition after Reeves's Budget decision. He argued that the freeze is unfair and hurts working people, especially with rising fuel prices following the Iran crisis. Haynes told the Express: “MPs have given themselves a 5% pay rise, they aren’t feeling it like we are. Fuel prices have shot up and they’re driving around in chauffeur-driven limousines.”
He proposed raising the allowance to £18,000, noting that a minimum wage worker earning £12.71 per hour for 40 hours per week would earn around £26,000 annually, but after tax and high petrol costs, the burden is severe. Haynes warned that if Burnham does not reverse the freeze, the campaign will “bury Burnham” and push for an early election.
Government response: £40 billion cost would cripple public services
In May, HM Treasury responded to the petition, dashing campaigners' hopes. The statement read: “The Government is committed to keeping taxes for working people as low as possible while investing in public services and not taking risks with the economy.” It explained that raising the Personal Allowance to £18,000 would cost over £40 billion per year, equivalent to roughly a fifth of the NHS budget in England or around two-thirds of defence spending.
The Treasury emphasised that the tax system is “highly progressive” and that increasing the threshold would benefit higher earners more than basic-rate taxpayers on average. It pointed to other measures to support low-income workers, such as asking the Low Pay Commission to account for the cost of living when recommending minimum wage rates, and providing 15 hours of free childcare for three- and four-year-olds.
Fiscal drag and the impact on workers
Under current rules, workers can earn £12,570 tax-free, then pay 20% tax on earnings up to £50,270, 40% on earnings up to £125,140, and 45% above that. The freeze means that as wages rise, more people are pushed into higher tax brackets without any increase in the threshold. Haynes argued in his petition: “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.”
The Treasury’s response also noted that the freeze was originally set by the previous government from 2021/22 to 2027/28, and Reeves extended it for three more years to the end of the decade. It stated: “The Government is making these fair and necessary choices on tax so it can deliver on the public’s priorities.” Other cost-of-living measures include cutting energy bills, freezing rail fares, and freezing NHS prescription fees.
Campaign vows to keep pressure on Burnham
Despite the rejection, Haynes and supporters plan to maintain pressure on the new Prime Minister. He said: “Let's Bury Burnham. Keep the pressure on the Labour Party and get an early election.” The petition remains open for signatures, and campaigners hope to force a parliamentary debate if it reaches 100,000 signatures.
