Andy Burnham call to raise £18,000 personal tax allowance hits key threshold

Andy Burnham is facing calls to raise the personal tax allowance to £18,000 —as a campaign hit a key threshold in a bid to force MPs to debate the issue in the Commons. Today a petition on the parliament website went past the key number of 50,000 signups, meaning it is half way to being considered for an MP showdown which will put pressure on new Chancellor John Healey to consider changing the rules.

The £12,570 threshold has been frozen since 2021, resulting in more people being dragged into paying income tax as earnings increase. The Institute for Fiscal Studies has estimated that unfreezing the threshold could end up costing £8.5-9bn a year.

However criticism has been growing with campaigners saying the poorest paid workers in the UK are being unfairly targeted. In March 2021, the then Chancellor Rishi Sunak announced that inflation uprating of income tax thresholds would be suspended and the allowance frozen at its April 2021 level of £12,570 until April 2026. That freeze was later extended, first by two years under the chancellorship of Jeremy Hunt and, most recently, by a further three under that of Rachel Reeves. The result is that, under current plans, the personal allowance will remain at its current level of £12,570 until April 2031 – a full decade after it first reached that level.

Had it been uprated in line with inflation since April 2021, the personal allowance would today stand at £16,070 – £3,500 higher than its actual level, the Institute for Fiscal Studies (IFS) said this month. It said: " This represents a 22% real-terms reduction in the value of the personal allowance between 2021–22 and 2026–27, with a further 8% reduction expected by 2030–31."

It added: "Were the Prime Minister minded to increase the personal allowance, one option for doing so would be to end the freeze early – for example, by returning to inflation uprating from April 2027. While this would not reverse the real-terms cuts to the personal allowance made since April 2021, it would prevent those currently planned over the next four years.

"By 2030–31, this would entail annual tax savings (in today’s prices) of £198 for most basic-rate taxpayers – that is, those with incomes between £12,570 and £50,270 a year at current thresholds – and £395 for higher-rate taxpayers whose incomes do not exceed £125,140."

This follows fresh figures revealing that pensioners paid approximately £8bn more in tax last year after frozen personal allowances dragged individuals into higher tax brackets. The total tax burden on retirees soared from £21.1bn to £29.8bn, representing an increase of more than 40 per cent in just two years, according to the latest HMRC pension participation data.

From next year, those in receipt of the full new state pension will exceed the frozen £12,570 personal tax allowance threshold — above which individuals pay 20 per cent on taxable income.

Andy Burnham has confirmed that individuals living solely on this amount will be exempt from paying tax — yet a growing number of those on the lowest wages are being forced to hand over more to the taxman. The petition, which remains open for signatures until 30 September, stated: "Raise the personal tax allowance to £18,000. 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."

Andy Burnham disclosed that when he was campaigning to become Prime Minister, the personal tax allowance was the single biggest issue raised on doorsteps, and it had 'lodged in my mind'. Despite this, the Government has since signalled that changes to the threshold will not form part of its initial measures to ease the cost of living crisis.

Following the petition amassing 10,000 signatures, the Treasury issued an official response. It stated: "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."

It added: "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.

"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."

To support the petition and read the Treasury's full response, click here.