{"id":123471,"date":"2026-07-26T09:00:00","date_gmt":"2026-07-26T08:00:00","guid":{"rendered":"https:\/\/en.econostrum.info\/uk\/?p=123471"},"modified":"2026-07-26T08:53:03","modified_gmt":"2026-07-26T07:53:03","slug":"income-tax-cut-under-discussion-burnham","status":"publish","type":"post","link":"https:\/\/en.econostrum.info\/uk\/income-tax-cut-under-discussion-burnham\/","title":{"rendered":"Income Tax Cut under Discussion as Burnham Prepares His First Budget"},"content":{"rendered":"\n

The personal allowance has remained frozen at \u00a312,570 since 2021 despite several years of high inflation. While raising the threshold would provide some relief for taxpayers facing higher living costs, experts say any reduction in income tax <\/strong>would likely require other measures to offset the loss of revenue.<\/p>\n\n\n\n

The debate comes as ministers face growing scrutiny over how they will finance a series of recent spending commitments. According to the Express, these include the removal of VAT on household electricity bills, a \u00a32 bus fare cap and reduced business rates for pubs, all of which have increased expectations that the Autumn Budget could also contain tax rises or other revenue-raising measures.<\/p>\n\n\n\n

Frozen Personal Allowance Remains at the Centre of Budget Speculation<\/strong><\/h2>\n\n\n\n

Speculation has intensified that Prime Minister Andy Burnham and Chancellor John Healey are examining whether to ease the freeze on the personal allowance, which determines how much income people can earn before paying income tax. According to AJ Bell’s senior pensions and savings expert Charlene Young<\/a>, increasing the allowance would be popular with households but would also represent a substantial cost to the Exchequer.<\/p>\n\n\n\n

A \u00a3500 increase to the personal allowance would reduce the annual income tax bill of a basic-rate taxpayer by \u00a3100. HMRC estimates, cited by AJ Bell, suggest that every \u00a3100 increase in the personal allowance costs around \u00a31 billion each year, placing the annual cost of a \u00a3500 increase at roughly \u00a35 billion<\/strong>.<\/p>\n\n\n\n

The current threshold was frozen in 2021 under former Chancellor Rishi Sunak as part of efforts to repair the public finances following the Covid pandemic. According to AJ Bell, had the allowance increased in line with inflation, it would now exceed \u00a316,000. The firm estimates that an average taxpayer is currently paying around \u00a3700 more each year<\/strong> than would otherwise have been the case, with that figure approaching \u00a31,000 by 2030-31 if the freeze continues.<\/p>\n\n\n\n

Charlene Young said that unless the threshold is increased more substantially and linked to inflation once again, many taxpayers could feel that any short-term improvement falls well short of reversing previous losses.<\/p>\n\n\n\n

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The top 10% of earners in Britain \u2014 those making \u00a372,500 or more \u2014 pay 58.4% of all income tax. That's up from 50.3% in the 1999-2000 tax year, according to HMRC data.

In comparison the bottom 50% of earners pay only 10% of the total income tax take \u2014 down from 11.6% in\u2026 pic.twitter.com\/mAKSz4irEy<\/a><\/p>— Cut My Tax (@CutMyTaxUK) July 25, 2026<\/a><\/blockquote>