A petition calling for an increase in the UK’s income tax personal allowance from £12,570 to £20,000 has gained momentum, surpassing 130,000 signatures and triggering a potential debate in Parliament. The proposal, spearheaded by Alan David Frost, aims to ease the tax burden on low earners and pensioners, allowing them to retain more of their income without taxation.
The Push for a Higher Personal Allowance
Frost’s petition argues that raising the tax-free threshold would enable low-income workers to move off benefits and ensure pensioners can maintain a decent standard of living. The current allowance of £12,570, frozen since 2021, means that many people see more of their earnings taxed as wages and inflation rise.
The former Conservative government extended this freeze until April 2028, a decision widely criticized for not adjusting the threshold to match rising costs. As a result, millions of taxpayers have gradually been pushed into higher tax brackets—a phenomenon known as fiscal drag.
How the Tax System Affects Workers and Pensioners
The personal tax allowance determines how much of an individual’s income is exempt from taxation. Currently:
- Earnings up to £12,570 are tax-free.
- Above £12,570, income is taxed at 20% (basic rate).
- For earnings above £50,270, the tax rate rises to 40% (higher rate).
- Those making over £100,000 see their personal allowance reduced, with £1 deducted for every £2 earned above the threshold, creating an effective 60% marginal tax rate on earnings between £100,000 and £125,140.
With the allowance frozen, workers facing inflation-driven pay increases could end up in higher tax bands, reducing their take-home pay despite earning more. Pensioners, particularly those relying on state pensions, are also impacted, as their income can now exceed the tax-free threshold, forcing them to pay income tax for the first time.
Government Response and Future Outlook
Following the petition’s success, the UK government must formally respond and consider a parliamentary debate. While no immediate policy changes have been announced, the issue is gaining political traction.
In the October 2024 Budget, Chancellor Rachel Reeves stated that the government would not extend the freeze beyond 2028-2029, acknowledging concerns over fiscal drag. However, this does not mean the personal allowance will increase—only that future adjustments remain possible.
Critics argue that without urgent reform, the current system will continue to erode disposable incomes, disproportionately affecting low earners, pensioners, and middle-class workers. Supporters of the petition believe that raising the threshold to £20,000 would provide an immediate boost to household finances and stimulate the economy.
The petition remains open for further signatures, allowing more people to voice their support. If Parliament agrees to debate the issue, MPs will have the opportunity to discuss potential reforms, though any significant tax changes would likely be part of future budget announcements.
