A major public campaign asking the UK Government to raise the income tax personal allowance from £12,570 to £20,000 has received an official response. The movement has gained strong support, with over 250,000 people signing a petition to push the change. The demand focuses on helping low-income workers and pensioners who are being dragged into paying tax due to the frozen allowance limit.
The petition, started by Ian Frost, says raising the limit would help people get off benefits and live with dignity, especially during the ongoing cost of living crisis.
What’s the Problem?
Since 2021, the personal tax-free allowance has stayed fixed at £12,570. That means any income above this amount is taxed at 20%, and incomes above £50,270 are taxed at 40%. Because wages have slowly risen due to inflation, more people are now pushed into paying tax, even if they’re not earning much more. This issue is known as fiscal drag.
As prices rise, but tax limits stay the same, many low earners end up paying more tax even though their real income hasn’t improved.
What Happened in Parliament?
This week, the petition was debated in Westminster Hall, where MPs discussed how frozen tax thresholds are hurting working families and pensioners. Liberal Democrat MP Daisy Cooper said the huge number of petition signatures was a “cry for help” from people struggling across the country.
She said, “Taxes are rising, but services are not improving. This toxic combination is making life harder for ordinary families.”
What Does the Government Say?
James Murray, Exchequer Secretary to the Treasury, responded to the debate. He agreed that taxes should be low for workers and pensioners, but said the plan to raise the tax-free limit to £20,000 would cost too much.
He explained that such a move would cost over £50 billion, which is more than the cost of Liz Truss’s mini-budget that caused market instability. He warned that cutting taxes by this amount without a proper plan could result in major cuts to public services like the NHS or defence, or risk economic chaos.
He added, “We want to put more money in people’s pockets, but in a fiscally responsible way. If we don’t, it could hurt the very people we’re trying to help.”
Is the UK’s Tax Allowance Really Generous?
Mr. Murray also said that the UK already has one of the most generous personal allowances among major world economies. The UK’s threshold is higher than in many OECD and G7 countries. He reminded MPs that the decision to freeze the allowance until April 2028 was made by the previous Government, and the current Government has not extended the freeze further.
He also noted that no increases were made to other taxes like National Insurance or VAT, meaning people still keep more of their income overall.
The petition to raise the tax-free income limit to £20,000 shows how many people are feeling the pressure of rising living costs and frozen tax thresholds. While the government agrees with the need to support low earners, it says the current financial situation makes a big tax cut difficult without risking public services. The debate is not over, and with more pressure from the public, this issue is likely to stay in focus ahead of the next general election. For now, the threshold remains at £12,570, but the conversation continues.
FAQs
What is the current UK income tax threshold?
The personal income tax allowance is £12,570. Earnings above this amount are taxed at 20%.
Why do people want the threshold raised to £20,000?
Raising the threshold would help low earners avoid tax and deal better with rising living costs.
What is fiscal drag?
Fiscal drag is when people end up paying more tax due to frozen thresholds, even if their income rises slightly.
How much would it cost to raise the threshold to £20,000?
The government says it would cost over £50 billion, affecting funding for public services.
Has the government agreed to raise the threshold?
No, the government says it cannot afford such a large change without risking the economy and public services.
Yes 20.000 would be much fairer especially for OAPs