Plan to raise Personal Allowance to £18,000 given official update | Personal Finance | Finance
HM Treasury has rejected calls to raise the allowance (Image: Getty)
Calls to finally raise the tax-free Personal Allowance to help working people have gathered more than 20,000 backers in a matter of weeks since the Express first shared news of a reader’s petition lobbying the Treasury.
A new petition launched by the Express reader is urgently calling on the government to end its ‘unfair’ tax-free Personal Allowance freeze which is pushing more workers into paying more tax.
Mike Haynes, 64, from Devon, launched the proposal to get the tax-free Personal Allowance increased to account for inflation, following Labour’s decision to extend the existing freeze all the way to 2031.
He urged the Treasury to help working people afford petrol following the Iran crisis which has seen the price of fuel soar while calling out Sir Ker Starmer for not doing enough
But on Tuesday, the government stressed that the tax-free allowance is much higher than most countries, and that raising the threshold would benefit higher earners more than lower earners.
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Mr Haynes, who works as a warehouse forklift instructor, told the Express that the freeze is ‘unfair’ and hurts working people.
The Axminster man said: “MPs have given themselves a 5% pay rise, they aren’t feeling it like we are. Fuel prices have shot up and they’re driving around in chauffeur-driven limousines.
“If the minimum wage is £12.71 [an hour], multiply that by 40 [hours] that takes you up to £26,000 a year, when you’re spending £7 on a gallon of petrol and things like that, that’s going to chip into that, I think the exemption should be £18,000.”
The tax-free Personal Allowance is the amount of money an individual is allowed to earn in a single tax year before they have to pay Income Tax to HMRC.
Workers can earn £12,570 tax-free, then must pay 20% tax on all earnings above that figure, and 40% on earnings above £50,270, and 45% on earnings over £125,140.
The allowance has been frozen since 2021, and Chancellor Rachel Reeves confirmed in the Budget that it will continue to be frozen until 2031 at the earliest, which means it will have been stuck at the same level for 10 years.
The threshold level of £12,500 in 2019 is worth approximately £16,215 in 2026 accounting for inflation.
Following Chancellor Rachel Reeves’ decision to continue the freeze until 2031, Mr Haynes has launched the parliamentary petition urging the government to reconsider.
He wrote in the petition: “Since 2021 personal tax allowance has been frozen at £12,570. This freeze was due to expire this year but the Chancellor of the Exchequer has extended it to 2031.
“We want to keep some more of our own money.
“If you are earning minimum wage then you may soon be paying tax because of fiscal drag. Some higher earners pay little or no tax due to clever use of accounting rules. We think this is so wrong.”
On Tuesday, the government responded to the petition but dashed campaigners’ hopes, reiterating it will not raise the thresholds sooner than planned.
It said that increasing the threshold would defund schools and hospitals, and benefit ‘higher earners more than basic rate taxpayers’.
HM Treasury responded to the petition with a statement which read: “The Government is committed to keeping taxes for working people as low as possible while investing in public services and not taking risks with the economy.
“The previous government froze the main income tax thresholds from 2021/22 until 2027/28 – this means the Personal Tax allowance was not due to rise until April 2028 at the earliest.
“To ensure that the Government can deliver on the public’s priorities, at Budget 2025 it was announced that the personal tax thresholds, including the Personal Allowance, would be maintained at their current levels for a further three years to the end of this decade.
“The Government currently has no plans to increase the Personal Allowance to £18,000. Increasing the Personal Allowance to £18,000 would come at a significant fiscal cost of over £40 billion per year. This would also benefit higher earners more than basic-rate taxpayers on average.
“Raising the Personal Allowance to £18,000 would reduce tax receipts substantially, decreasing funds available for the UK’s hospitals, schools, and other essential public services that we all rely on. A £40 billion cut in public services is equivalent to slashing roughly a fifth of the NHS Budget in England, or around two thirds of defence spending.
“The income tax system is highly progressive, with different rates of tax sitting above an internationally high Personal Allowance.”
It added: “The Government is making these fair and necessary choices on tax so it can deliver on the public’s priorities. Alongside this, the Government is keeping the contribution as low as possible by pursuing a programme of reform to fix longstanding issues in the tax system.
“To support the lowest paid workers in our economy, the Government has asked the Low Pay Commission to account for the cost of living when making each of their recommendations on the minimum wage rates that have applied since April 2025. The government is also supporting families through the universal offer of 15 hours of government-funded childcare for all parents of 3- and 4-year-olds and eligible working parents of children aged 9 months and above can access 30 hours a week in free childcare.
“At Budget 2025, the Government also announced a package of measures that will bear down on prices and help ease cost of living pressures for working people, targeting everyday expenses. This includes cutting energy bills and freezing rail fares and NHS prescription fees.
“The Government keeps all taxes under review as part of the policy making process.”
