MPs have intervened amid calls for Chancellor Rachel Reeves to raise the personal tax allowance to be raised from £12,570 to £45,000. This threshold has been frozen since 2021 and means some of the poorest workers in the UK have been forced to pay more income tax.
On the Parliament website a petition has gained 43,626 signatures as people rail against the ‘unjust’ tax increase which has been branded ‘fiscal drag’. The petition, which can be seen here, posted by Denver Johnson said: “The Personal Allowance is the amount of income a person can get before they pay tax. It stands at £12,570 in 2024. We would like the standard Personal Allowance raised to what we think is a more realistic figure of £45,000.
“We think that the Personal Allowance, as termed by the government, has been kept unreasonably low for far too long, at the expense of the poorest, most needy people in our society. We feel that the poorer majority should pay substantially less than the wealthy. We think that the tax system seems designed to make the divide between rich and poor increase exponentially.”
This threshold has been frozen since 2021 and means that millions of people earning low salaries have been drawn into paying income tax, in a process known as ‘fiscal drag’. Currently, the threshold for paying the basic 20% tax begins at £12,570, and the 40% tax bracket starts at £50,270 earnings – both have been frozen since 2021. Experts project this will garner £1.2 billion for the Treasury by the end of the freeze period in 2028. The situation, known as ‘fiscal drag,’ sees a growing number of taxpayers being pulled into the tax-paying bracket or pushed into higher tax rates, and specialists argue that maintaining the lower threshold puts undue strain particularly on those earning the least.
The Treasury responded to the petition earlier this month but now an influential committee of MPs has said this response was inadequate and didn’t actually deal with the issues raised – and ordered the government to come up with something better. The Petitions Committee which is the group of MPs who oversee the petitions system “has considered the Government’s response to this petition. They felt the response did not respond directly to the request of the petition. They have therefore asked the Government to provide a revised response.”
At 100,000 signatures, the petition will be considered for debate in Parliament. As the petition on the parliamentary website got more than 10,000 signatures it was due a response which has now come from the Treasury – which has now been called into question. It said: “The Government has not extended the last Government’s freeze on personal tax thresholds, meaning from April 2028 working people will keep more of their earnings as thresholds will rise by inflation.
“The previous Government made the decision to freeze the income tax Personal Allowance (PA) at its current level of £12,570 until April 2028. The current Government is committed to keeping taxes for working people as low as possible while ensuring fiscal responsibility and so, at our first Budget, we decided not to extend the freeze on personal tax thresholds. As a result, they will rise with inflation from April 2028, meaning working people will keep more of their earnings.
“Increasing the Personal Allowance to £45,000 would come at a significant fiscal cost of more than £270 billion per annum on average over the next three years (based on HMRC’s ready reckoners, published here). This would reduce tax receipts substantially, decreasing funds available for the UK’s hospitals, schools, and other essential public services that we all rely on. It would also undermine the work the Chancellor has done to restore fiscal responsibility and economic stability, which are critical to getting our economy growing and keeping taxes, inflation, and mortgages as low as possible.
“The Government keeps all taxes under review as part of the policy making process. The Chancellor will announce any changes to the tax system at fiscal events in the usual way.”
To view the petition click here.