Government responds to calls for £20k tax allowance increase after intervention | Personal Finance | Finance
The government has issued a statement regarding the mounting pressure to raise the personal tax allowance from £12,570 to £20,000. A burgeoning campaign is urging the Treasury to hike the threshold at which individuals begin to pay income tax, amid fears that it disproportionately targets the nation’s lowest earners.
Next year, depending on the increase in state pensions, pensioners could find themselves taxed on their income for the first time due to a phenomenon known as ‘fiscal drag’. Since 2021, the limit has been static and is set to remain so until at least 2028.
As salaries increase, an ever-growing number of low-wage workers are being compelled to fork out more in taxes.
A petition on the Parliament website demanding reform has garnered over 235,000 signatures, prompting a scheduled Commons debate on May 12. In a recent development, Labour MP Tanmanjeet Singh Dhesi questioned Chancellor of the Exchequer, Rachel Reeves, asking: “If she will make an estimate of the impact of changing the tax free personal allowance to £20,000 on tax receipts.”
Responding to this, Exchequer Secretary (HM Treasury) James Murray stated there were ‘no plans’ to alter the current allowance, emphasising: “The 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.”
“The Government has no plans to increase the Personal Allowance to £20,000. Increasing the Personal Allowance to £20,000 would come at a significant fiscal cost of many billions of pounds per annum. 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.”
The petition launched by Alan Frost is urging Rachel Reeves to: “Raise the income tax personal allowance from £12570 to £20000. We think this would help low earners to get off benefits and allow pensioners a decent income.
“We think it is abhorrent to tax pensioners on their state pension when it is over the personal allowance. We also think raising the personal allowance would lift many low earners out of benefits and inject more cash into the economy creating growth.”https://petition.parliament.uk/petitions/702844
The Treasury has already issued a detailed response, and the topic is set to be debated in the Commons—a step that only occurs once a petition has garnered over 100,000 signatures.
To see the full petition, click here.
