𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

A campaign to increase the threshold for income tax has gained momentum as it nears a key threshold. Calls have been growing for Chancellor Rachel Reeves to change the personal tax allowance boundary for the lowest paid in the Autumn Budget on Novebmner 26.

There are concerns that millions more people, many of whom are the lowest paid in the country, have been caught up in paying tax due to ‘fiscal drag’. This is because the lowest income tax threshold has been frozen at £12,570 since 2021 but inflation, which impacts wages has been soaring.

This means that some of the lowest-paid workers face taxation as soon as they earn above that figure – and because it has stayed static, inflation and wage rises mean that millions more are liable for tax than would have been the case if it had increased as usual.

A new petition on the Parliament website to call on the government to raise this figure has now almost reached 10,000 signatures, meaning the Treasury will be forced to respond. If it reaches 100,000 signups, a debate could be held in Parliament, putting more pressure on Ms Reeves to include changes in the November Budget.

The petition, established by Shannon Keene, says: “Raise the income tax personal allowance from £12,570 to £20,000. This would help with increasing rent, mortgages, Council tax, and Gas and Electric bills. Some families can’t afford to go back to work after children due to childcare costs wiping out their whole income!

“We think that we are currently paying ridiculous amounts of tax, and that minimum wage isn’t even enough to support an average family. We believe that this would lead to a massive increase in people willing to look for work, instead of people not wanting to, due to it being too expensive to live now.”

There have been repeated petitions on the issue, showing the strength of feeling in the country. Earlier this year, one demanding the level be lifted to £20,000 gathered an impressive 281,792 signatures on the Parliament website before it stopped accepting new supporters earlier this summer. This also triggered a Parliamentary debate during which the Treasury put the cost at £50 billion.

Demonstrating the depth of public concern, a fresh petition has been launched urging for the income tax personal allowance to be increased from £12,570 to £20,000.

The fact that the previous petition was among the largest ever recorded on the parliament website was interpreted by campaigners as proof of the overwhelming public feeling surrounding the matter. Currently, the basic tax rate of 20% applies to earnings above £12,570, whilst higher earners face the 40% rate on income exceeding £50,270 – both thresholds have stayed frozen since 2021.

The row focuses on the notion of ‘fiscal drag’, which stems from the personal income tax allowance being stuck at £12,570 since 2021.

During the debate earlier this year at Westminster Hall in the House of Commons, Liberal Democrat Daisy Cooper said the massive support revealed the country’s mood: “The number of people who have signed it speaks to the strength of public feeling about this issue, which is a serious policy challenge for all political parties. Indeed, I think the petition does more than show the strength of feeling that exists.

“I regard it as a cry for help, because right around the country there are struggling families gripped by a cost-of-living crisis”.

“We have a toxic combination that means that people are seeing their taxes go up but not seeing services improve. It is leading to that cry for help.”

James Murray, Exchequer Secretary to the Treasury, has warned that the proposed increase of the tax threshold to £20,000 would come at a significant cost. He stated: “I recognise the views of everyone who has put their name to the petition, and let me be clear that, as a Government, we want taxes on working people and on pensioners, who have worked hard all their lives, to be as low as possible.

“We were elected to put more money in people’s pockets and, crucially, we were elected to do so in a fiscally responsible way. That is a critical point to understand.

“We aim to keep taxes on working people and pensioners as low as possible, but if we were to heed the calls of some Opposition parties and abandon fiscal responsibility, it would lead to economic chaos and the collapse of public services, and that would harm working people and pensioners the most.

“Raising the personal allowance to £20,000 would cost more than £50 billion. That is more than the £45 billion of unfunded tax cuts announced by Liz Truss in her disastrous mini-Budget.”

The debate can be viewed here.

To see and back the new petition, click here.