A petition on the Parliament website is calling for the lowest income tax threshold to be increased from £12,570 to £20,000, with only six days left for people to add their signatures. The deadline to sign is Saturday, November 14, and if the petition reaches 10,000 signatures, the Treasury will be required to respond and outline its position on any potential change.
The personal allowance has been frozen since 2021, and under current plans it will remain at that level until 2031. This freeze has led to what is known as 'fiscal drag', where some of the lowest-paid workers end up paying more tax over time.
What the petition proposes
The petition, created by Wade Reid, argues that the frozen allowance, combined with rising living costs, means workers are paying more tax in real terms. It 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."
The petition adds: "The personal allowance has been frozen since 2021 while living costs have risen sharply, meaning workers are paying more tax in real terms. As wages increase slightly to keep up with inflation, more people are pulled into paying tax or higher rates. Increasing the threshold to £20,000 would put more money into millions of workers' pockets, ease financial pressure, and support low and middle earners during a cost of living crisis."
Chancellor's budget response
Chancellor John Healey did not make any changes to the allowances in the Budget last month, despite the calls. However, he told ITV viewers that there were potential 'bigger changes' on the way.
During an ITV appearance, personal finance expert Martin Lewis read out a question from a viewer asking whether the Chancellor would admit he was raising taxes on working people by stealth through the continued freeze on tax thresholds. Lewis pressed Mr Healey on when he would raise tax thresholds.
Mr Healey responded: "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."
He added: "So where I could avoid that, I decided I should do that. And it was a budget, if you step back, that was designed to take action where we could just to help take a bit of pressure off people, give people a bit of breathing space, which we've done, especially on energy. And it was a budget also designed to try and do that a bit for business."
Lewis challenged the Chancellor on the issue of fiscal drag, saying: "Forgive me, this specific question. You said in the speech yesterday, we are not raising taxes on working people. Well, by all definitions, the fiscal drag, the freezing of the tax thresholds is the biggest tax that has ever been raised in recent history. You accept you are while you're not raising tax rates, you are increasing taxes."
Impact of the freeze
Mr Healey said: "In truth, it is part of any government's revenue and judgments about thresholds as well as rates are part of the judgments that have to be taken, and the plans for the thresholds have been set for the next few years. And I took the decision in this budget that I wouldn't touch those and I would do what I can where I could to help people. And then make some bigger changes for the long term. Because fundamentally we've got parts of our system that needs fixing."
The basic Personal Allowance in the UK is £12,570 for the 2026/27 tax year. This is the amount a person can earn annually before they begin paying 20 per cent income tax. The higher 40% rate kicks in at £50,271 and the additional 45% rate at £125,140.
Independent data suggests a basic-rate earner (£20k–£50k) pays roughly £700 to £800 more tax per year purely due to the freeze. According to the most recent HMRC data, there are 31.4 million basic-rate taxpayers across the country, representing a 15% rise in the number of people paying income tax at 20% since tax bands were frozen at 2021 levels.
A total of 7.7 million individuals are anticipated to pay the higher rate this year, an increase of a million compared to two years ago. An additional 1.3 million people are projected to pay the 45% additional rate, substantially more than the 263,000 people paying it in 2010-11 when it was initially introduced.
Had the threshold increased in line with inflation, it would stand at approximately £16,072 next year and £17,380 by 2029-30, according to analysis by AJ Bell. The investment platform stated that should the government choose to raise the personal allowance to £16,000, it would cost around £35bn, and increasing the allowance by merely £100 would cost roughly £1bn annually.
