The Government refuses to increase the annual Personal Allowance to £20,000
Newsletter issue – July 2025
Parliament debated a petition calling for the income tax threshold to be raised from £12,570 to £20,000 to allow people to keep more of their earnings. The petition, signed by over 250,000 people, was spearheaded by pensioner Alan Frost, who described it as a "cry for help."
MPs acknowledged concerns over increasing tax burdens on low earners and pensioners but stated that raising the threshold would cost between £40 billion to £90 billion annually. Labour's James Murray, Exchequer Secretary to the Treasury, rejected the proposal, citing concerns that it could jeopardize funding for defence and the NHS.
The ongoing income tax threshold freeze, first introduced in 2021, has led to more workers falling into higher tax brackets due to "fiscal drag. The Institute for Fiscal Studies (IFS) estimates that, by 2025-26, an additional 1.3 million people will enter the tax system, with 1 million pushed into the 40% higher-rate band.
Despite growing support, the Treasury has firmly rejected the petition, arguing that raising the threshold would significantly reduce tax revenue needed for public services. Given the recent U-turn on the winter fuel allowance, it remains to be seen if the Government will change its mind on the Personal Allowance threshold.