Raise personal income tax allowance £12,570 to £20,000 Monday update as key threshold met
By Google News Personal Finance ·
A campaign calling on Chancellor John Healey to take action over frozen tax thresholds has hit a key threshold - meaning the Treasury must respond. In last month’s budget, Chancellor John Healey failed to act despite widespread calls for change.
A petition on the Parliament website is demanding that the lowest level of tax – currently £12,570 – be raised to £20,000. Income tax thresholds have remained frozen since 2021 and, under existing plans, will continue to do so until 2031.
Now the call - which has only until Saturday to run - has smashed through 10,000 signups meaning officials must give an official answer. Prime Minister Andy Burnham has faced pressure and speculation regarding potential changes to UK income tax thresholds.
Frozen at £12,570 since April 2021, the policy has been extended until 2031 - and in last month’s Budget Mr Healey did not make any change to this. This freeze has continued to pull more earners into paying income tax or higher brackets as wages rise (a process known as “fiscal drag”).
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As a result, some of the lowest-paid workers are being forced to hand over ever-increasing sums in tax, in what is commonly referred to as ‘fiscal drag’. The basic Personal Allowance in the UK stands at £12,570 for the 2026/27 tax year – the amount one can earn annually before becoming 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 indicate that a basic-rate earner (£20k-£50k) pays approximately £700 to £800 more in tax each year solely as a consequence of the freeze.
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.lick here.
“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.”
Mr Healey made no adjustments to the allowances in the Budget - though he indicated to ITV audiences that potential ‘bigger changes’ could be forthcoming. During his ITV programme, personal finance expert Martin Lewis shared 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.”
Martin enquired: “When will you 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.
“So where I could avoid that, I decided I should do that. And it was a budget, if you step back, that was designed…
Originally published by Google News Personal Finance
