{"id":125855,"date":"2026-09-23T12:00:00","date_gmt":"2026-09-23T11:00:00","guid":{"rendered":"https:\/\/en.econostrum.info\/uk\/?p=125855"},"modified":"2026-09-23T11:58:30","modified_gmt":"2026-09-23T10:58:30","slug":"new-tax-allowance-changes-revealed","status":"publish","type":"post","link":"https:\/\/en.econostrum.info\/uk\/new-tax-allowance-changes-revealed\/","title":{"rendered":"New Tax Allowance Changes Revealed as 20%, 40% and 45% Bands Face a Major Rethink"},"content":{"rendered":"\n

The Liberal Democrats have announced plans to change the UK income tax system, including increasing the personal tax-free allowance and raising the thresholds <\/strong>for the higher income tax rates. The proposals would alter the points at which taxpayers move into the 20%, 40% and 45% tax bands if the party forms the next government.<\/p>\n\n\n\n

The plans have been presented by party leader Ed Davey<\/strong> as part of a wider income tax reduction programme. According to the Liberal Democrats, the measures would reduce the number of people paying income tax and change the income levels at which some workers begin paying higher rates.<\/p>\n\n\n\n

Proposed Changes to Personal Allowance and Tax Thresholds<\/h2>\n\n\n\n

The current UK income tax system provides a standard Personal Allowance of \u00a312,570, meaning individuals do not pay income tax on income up to that amount. According to HM Revenue and Customs (HMRC<\/a>), the current tax bands <\/strong>for people with the standard allowance are 20% on income from \u00a312,571 to \u00a350,270, 40% on income from \u00a350,271 to \u00a3125,140, and 45% on income above \u00a3125,140.<\/p>\n\n\n\n

The Liberal Democrats have proposed increasing the tax-free personal allowance to \u00a315,000. The party said this would remove 2.5 million people from paying income tax altogether.<\/p>\n\n\n\n

The proposal would also raise the point at which the 40% higher rate begins. The threshold would increase from the current level of \u00a350,271 to \u00a356,000, according to the party\u2019s announcement. The Liberal Democrats said this change would take 750,000 people out of paying the higher rate.<\/p>\n\n\n\n

According to Birmingham Mail<\/a>, the party has also proposed increasing the threshold for the 45% additional rate. The current rate applies to income above \u00a3125,140, while the proposed threshold would be \u00a3130,000. The Liberal Democrats said the change would affect about 1.23 million people.<\/p>\n\n\n\n

\n

5 key Income Tax facts:

1. Income Tax is a tax you pay on your earnings.
2. The 2025 to 2026 tax year starts on 6 April 2025 and ends on 5 April 2026.
3. Most people in the UK get a standard Personal Allowance of \u00a312,570 which you don't have to pay tax on.
4. You don't get a\u2026 pic.twitter.com\/XPeW7mPKbX<\/a><\/p>— GOV.UK (@GOVUK) April 6, 2025<\/a><\/blockquote>