Members of the public have just six days left to sign a petition urging the Andy Burnham government to raise the frozen income tax threshold. The petition, hosted on the Parliament website, calls for the lowest level of tax — currently set at £12,570 — to be increased to £20,000.
The deadline to sign is Saturday, 14th November. Should the petition reach 10,000 signatures, the Treasury will be obliged to respond and set out its position on any potential changes.
Frozen thresholds and fiscal drag
Income tax thresholds have remained frozen since 2021 and, under existing plans, will continue to do so until 2031. As a result, some of the lowest-paid workers are being drawn into paying ever-increasing amounts of tax, a phenomenon widely referred to as 'fiscal drag'. The basic Personal Allowance in the UK stands at £12,570 for the 2026/27 tax year, representing the amount you can earn annually before being liable for 20 per cent income tax.
The higher 40% rate applies from £50,271, while the additional 45% rate kicks in at £125,140. Independent figures suggest that a basic-rate earner (£20k-£50k) is paying roughly £700 to £800 more in tax each year solely as a consequence of the freeze.
Petition creator's appeal
The petition, created by Wade Reid, states: "The personal allowance has been frozen while living costs have risen, meaning workers pay more tax in real terms. Increasing it to £20,000 would put more money into millions of workers' pockets, helping with rising bills and supporting low and middle earners."
Mr Healey made no adjustments to the allowances in the Budget. However, he did inform ITV viewers that potentially 'bigger changes' were on the horizon. On his ITV programme, personal finance expert Martin Lewis read out a question from viewer Michael: "Will the Chancellor be honest and admit he's raising taxes on working people by stealth by continuing the freeze on tax thresholds? He is being totally disingenuous."
Chancellor's response and impact
Martin asked: "When will you raise tax thresholds?" Mr Healey said: "Well, our promise was not to raise rates across the board and this was a budget unlike in some previous years where I rejected the idea of broad-based tax rises because it isn't just businesses, it's individuals and households that are under pressure."
Fiscal drag takes effect when the government holds tax thresholds steady while inflation and nominal wages climb. Rather than openly increasing tax rates, the Treasury collects greater revenue as a growing proportion of workers' earnings exceeds the frozen boundaries. According to the most recent HMRC figures, there are 31.4 million basic-rate taxpayers across the country — representing a 15% increase in the number of people paying income tax at 20% since tax bands were frozen at 2021 levels.
Some 7.7 million individuals are expected to pay the higher rate this year — a rise of a million compared to two years ago. A further 1.3 million people are forecast to pay the 45% additional rate — considerably more than the 263,000 people who were subject to it in 2010-11 when it was first introduced. Had the threshold risen in line with inflation, it would sit at approximately £16,072 next year and £17,380 by 2029-30, according to analysis by AJ Bell. Were Burnham to opt for raising the personal allowance to £16,000, it would carry a price tag of around £35bn, the investment platform noted. Lifting the allowance by just £100 would cost roughly £1bn per year.
