A massive campaign to get the personal tax allowance limit raise has taken a new step with the launch of a new push. Currently people start paying tax on earnings at £12,570 – a threshold which has been the same since 2021 when it was frozen by the Tories.
This means millions of the poorest workers have ended up paying income tax through a process of fiscal drag as inflation drags even the lowest wages higher. A campaign has been growing to increase the basic threshold – with Reform leader Nigel Farage promising to raise it should he win power.
However so far Chancellor Rachel Reeves has refused to pledge to stop the freeze – with many fearing it will continue beyond 2028 when the Autumn Budget is announced later this year, with the country facing serious financial issues.
A petition calling for the level to be raised to £20,000 on the Parliament website got a massive 281,792 signatures before it stopped accepting new supporters last month. It also prompted a Parliament debate where the treasury claimed it would cost £50 billion.
Now a new petition has been started on the Parliament website calling for a more modest rise – for the lowest rate to be increased to £15,597 – which is what the creator Andy Hobson claimed it would be at had the government raised it using the inflation rate. It also calls for the higher £50,000 rate to rise to £62,379.02.
The Petition called on the government to: “Set the tax free allowance at £15,597, calculated via the Bank of England inflation calculator Vs 2021 when the current rate was set. The same for the higher rate, currently £50,271 set in 2021, this should be £62,379.02.
“We think this would give more people money in their pockets to pay their bills and rely less on government help. This could also mean more money being spent, so more VAT in the government’s pocket too. We are currently suffering fiscal drag because of this and the previous government chose to freeze thresholds but we think this is a stealth tax. As we pay more for goods, our tax free allowance stays the same meaning we’re getting poorer.”
The earlier petition showed the strength of feeling over the issue, becoming the site’s second most-signed petition—only exceeded by one which calls for a general election with over three million signatories. Currently, UK residents start paying tax on earnings above £12,570, a threshold that hasn’t shifted since 2021 resulting in many of Britain’s lower-paid workers being subjected to taxation.
The fact that it garnered a significant number of new signups was cited by campaigners as evidence of the intense public sentiment surrounding the issue. At present, the basic tax rate of 20% applies to earnings above £12,570, while higher earners are subject to the 40% rate on income exceeding £50,270 – both thresholds have remained unchanged since 2021.
The debate took place in May, and the petition ultimately closed last month with an impressive total. During the debate at Westminster Hall in the House of Commons, Daisy Cooper, a Liberal Democrat, stated that the overwhelming support demonstrated the nation’s sentiment: “The number of people who have signed it speaks to the strength of public feeling about this issue, which is a serious policy challenge for all political parties. Indeed, I think the petition does more than showing the strength of feeling that exists. I regard it as a cry for help, because right around the country there are struggling families gripped by a cost of living crisis”.
“We have a toxic combination that means that people are seeing their taxes go up but not seeing services improve. It is leading to that cry for help.”
James Murray, Exchequer Secretary to the Treasury, informed the debate that the projected cost of raising the threshold to £20,000 was significantly high. He clarified: “I recognise the views of everyone who has put their name to the petition, and let me be clear that, as a Government, we want taxes on working people and on pensioners, who have worked hard all their lives, to be as low as possible.
“Raising the personal allowance to £20,000 would cost more than £50 billion. That is more than the £45 billion of unfunded tax cuts announced by Liz Truss in her disastrous mini-Budget. Conservative and Reform MPs may have cheered Liz Truss on, but like the British people, we in the Labour party know the damage that that caused, and we will never let it happen again. To put it another way, if £50 billion was taken out of public services, that would be equal to wiping out almost the entire UK defence budget or slashing the NHS by a quarter. The British people will not be the winners if public services collapse or chaos returns to the economy.”
On the subject of the personal tax allowance, he stated: “Turning to the personal allowance, it is worth beginning by recognising that the UK has one of the more generous personal tax allowances in the OECD, and the most generous in the G7. As we have heard in today’s debate, it was the previous Government who made the decision to freeze the personal allowance at its current level of £12,570 until April 2028. In the Budget last autumn, this Government decided not to extend that freeze and we kept the basic, higher and additional rates of income tax, employee national insurance contributions and VAT unchanged, meaning that people will keep more of their income.”
Conservative MPs Sir Ashley Fox and Wendy Morton stepped in to argue that holding the basic allowance steady at £12,570 impacts pensioners the most severely. Morton said: “A considerable number of pensioners feel aggrieved and hard done by at the moment… because of a number of policy decisions”.
Tom Morrison of the Lib Dems highlighted how increasing the personal allowance could help alleviate financial strain on families in hardship. He implored the government to “find ways to lower the tax burden” and criticised the Tories for increasing taxes through frozen thresholds, thus exacerbating the financial woes of numerous families and pensioners.
Citing figures from Resolve Poverty, Morrison noted that an estimated 20% of children are living in poverty. He slammed the “unfair” child benefit cap as a major contributor to escalating child poverty rates and pressed for its abolition.
To view the new petition click here.