In a significant development, campaigners pushing for an increase in the personal tax allowance for the lowest-paid workers from £12,570 to £20,000 have secured a crucial breakthrough. A petition on the Parliament website, which has garnered an impressive 211,137 signatures, has led to the announcement of a Commons debate on the issue.
Having surpassed the 100,000-signature threshold, the petition was eligible for consideration for a debate; however, it took several months for it to be granted. The scheduled debate being scheduled on May 12 will put additional pressure on Chancellor Rachel Reeves ahead of the Spring Statement on March 26.
Campaigners are hopeful that the Chancellor will consider alleviating the financial burden on millions of low-income individuals. The lowest income tax threshold has been frozen at £12,570 since 2021, resulting in hundreds of thousands of the poorest workers being pulled into paying tax due to “fiscal drag.”
The petition, initiated by Alan David Frost, argues: “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.”
The petition further states: “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.”
This week, Tory leader Kemi Badenoch put Prime Minister Sir Keir Starmer on the spot during Prime Minister’s Questions regarding income tax. She challenged him with: “The Chancellor promised a once-in-a-parliament budget that she would not come back for more. And in that budget, she said there will be no extension of the freeze in income tax thresholds.”
Badenoch pressed further, seeking reassurance ahead of the emergency budget by asking: “Ahead of the emergency budget, will he repeat the commitment that she made?” In response, Sir Keir highlighted Labour’s achievements, stating: “This Government has already delivered two million extra NHS appointments, 750 breakfast clubs, record returns of people who shouldn’t be here, and a fully-funded increase in our defence spending. That is the difference that a Labour Government makes.”
Post-PMQs, a Conservative spokesperson suggested that “the only logical conclusion is that at next week’s emergency budget, Labour are plotting stealth taxes to drag more people into paying higher tax rates”. The income tax threshold, which has been frozen since 2021, has caused ‘fiscal drag’, pulling millions of lower earners into the tax bracket.
Currently, individuals earning over £12,570 face a 20% tax rate on their income.
The Treasury has officially addressed the swelling petition, which has now gathered over 210,000 supporters. In its statement, it declared “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.”
At present, earners begin to pay the basic 20% tax rate from an income threshold of £12,570, with the 40% higher rate kicking in at £50,270 – thresholds that have remained static since 2021. According to experts, by the time this freeze ends in 2028, it is anticipated to bring in an additional £1.2 billion for the Treasury.
The term ‘fiscal drag’ describes how more individuals end up paying tax or moving into higher tax bands over time, and financial commentators suggest that keeping the lower threshold exacerbates pressure on lower-income earners.
Here’s where you can see the petition.
