New personal tax allowance raise to £18,000 update as deadline passes
Millions of British taxpayers hoping for a significant increase in the amount they can earn before paying income tax are facing renewed uncertainty after a petition calling for the personal allowance to rise to £18,000 failed to secure enough signatures for a potential parliamentary debate.
The campaign, led by Mike Haynes, had attracted 86,538 signatures when it closed on September 30, falling short of the 100,000 threshold normally required for a petition to be considered for a debate in Parliament.
However, the campaign has not ended. Mr Haynes has launched a new petition calling for the income tax threshold to be raised to £18,000, putting the issue back before the public as Prime Minister Andy Burnham and Chancellor John Healey prepare for the Budget on October 28.
The renewed push comes at a sensitive moment for the Government. Households continue to face pressure from living costs, while workers whose salaries have risen over recent years may find themselves paying more tax even when their purchasing power has not improved significantly.
The central question is whether the new Chancellor will reconsider the existing tax threshold freeze or maintain the policy inherited from the previous administration.
For campaigners, the answer could make a substantial difference to workers who believe their wages have failed to keep pace with the cost of living. For the Treasury, however, any major increase in the personal allowance would involve difficult decisions over public finances, tax receipts and the funding of essential services.
The deadline has passed, but the campaign continues
The original petition, titled “Raise the personal tax allowance to £18,000”, closed on September 30 after attracting 86,538 signatures.
That was a considerable show of support, but it remained below the 100,000 signatures generally needed for a petition to be considered for a parliamentary debate. Reaching that threshold does not automatically guarantee a debate, as the relevant parliamentary committee considers petitions when deciding which issues should be discussed.
The new petition, titled “Raise income tax threshold to £18,000”, is intended to keep the issue alive. According to the supplied report, it remains open until April 6, 2027.
Mr Haynes believes the existing tax arrangements are placing an increasing burden on working people because the personal allowance has remained unchanged at £12,570 since 2021.
In his new petition, he argues that the Government should raise the threshold to £18,000, pointing to previous comments from Burnham that suggested the issue could be examined during the Budget process.
The campaign also criticises the decision to keep tax thresholds frozen for an extended period, arguing that workers are effectively being denied the benefit of rising nominal wages.
Mr Haynes wrote that, had thresholds not been frozen in 2021, the personal allowance could now be around £16,400 a year. That figure is an estimate of where the threshold might have stood under an alternative policy, rather than the current legal allowance.
Prime Minister Andy Burnham and Chancellor John Healey (Image: Andrew Aitchison, In Pictures via Getty Images)
His argument reflects a growing concern among taxpayers that a pay rise does not necessarily translate into a comparable improvement in household finances.
The Government, however, has previously rejected the proposal, arguing that a rise to £18,000 would carry a substantial fiscal cost and disproportionately benefit higher earners in cash terms.
The new petition therefore puts the same fundamental question back into the political spotlight: should the Government prioritise reducing income tax for workers, or preserve the revenue needed to finance public services?
What is the personal allowance, and why does it matter?
The personal allowance is the amount of income an individual can generally receive in a tax year before paying income tax. Under the arrangements described in the supplied report, the standard allowance stands at £12,570.
For someone with taxable earnings above that amount, income tax is normally charged on the portion above the allowance, subject to the applicable tax rates, bands and individual circumstances.
Raising the threshold to £18,000 would mean that an additional £5,430 of income would fall within the allowance for someone entitled to the full standard amount.
For a basic-rate taxpayer whose entire additional allowance would otherwise have been taxed at 20%, the illustrative maximum saving would be £1,086 a year, or approximately £90.50 a month.
That calculation assumes the individual is entitled to the full allowance and that the extra £5,430 would otherwise be taxed entirely at 20%. Actual outcomes can differ because of income levels, tax bands, personal circumstances and the rules that apply in different parts of the UK.
The proposal is therefore potentially significant for many working households, although the amount saved would not be identical for everyone.
Supporters say a higher threshold could leave workers with more disposable income, helping them meet housing costs, food bills, transport expenses and other everyday commitments.
They also argue that increasing the amount people can earn tax-free could strengthen incentives to work and help lower-paid employees retain a greater share of their earnings.
But the policy would also reduce the amount of income subject to tax. The resulting cost to the public finances would depend on the precise design of the reform, how it interacted with other tax rules and whether the Government introduced any offsetting measures.
Fiscal drag: why a frozen threshold can increase tax bills
One of the key arguments behind the campaign is the effect known as fiscal drag.
Fiscal drag occurs when tax thresholds remain fixed while wages and prices rise. As earnings increase, more income can become taxable, or taxpayers can move into higher tax bands, even if their real standard of living has barely improved.
For example, a worker earning £25,000 whose salary increases to £27,000 may pay more income tax because a larger portion of their income sits above the personal allowance.
That does not necessarily mean the worker is worse off in cash terms. But if inflation has also increased the cost of essentials, the real benefit of the pay rise may be much smaller than the headline increase suggests.
Over several years, the effect can become more pronounced. Employees may see their salaries rise in nominal terms while the personal allowance remains unchanged, gradually increasing the share of their income subject to tax.
The Government’s previous decision to maintain the main income tax thresholds for an extended period means this issue is likely to remain part of the debate over household finances.
Campaigners argue that raising the allowance would help offset the effect of fiscal drag. Critics of such a change counter that tax thresholds are only one element of the wider system and that increasing them is an expensive way to provide relief.
The question facing Healey is whether the Treasury can justify the cost of a higher allowance while meeting the Government’s other financial commitments.
Burnham previously left the door open to a review
The campaign has gained renewed attention because Burnham previously indicated that an increase in the personal allowance could be considered as part of the Budget.
When asked about the possibility during the summer, the Prime Minister stressed that he had not made a commitment to change the threshold.
He said: “I want to answer questions honestly in this job, as I said before. I think that’s all about trust in politics and doing politics differently and I’m determined to keep working in that way.”
Burnham also explained that the issue had been raised frequently but would need to be assessed alongside the Government’s other priorities.
He said there was “no commitment” to change the allowance and described his comments as an indication that the proposal would be examined rather than a promise to implement it.
That distinction is important as the October 28 Budget approaches. A statement that a policy will be reviewed does not mean that the Treasury has approved it, identified funding for it or decided when it might take effect.
Nevertheless, campaigners will be watching closely for any sign that Burnham’s Government is prepared to reconsider the position maintained by its predecessor.
The change in Prime Minister and Chancellor has added another layer of uncertainty. Supporters of the petition hope Healey will take a different approach from Rachel Reeves, who confirmed that the personal allowance would remain frozen at £12,570 until 2031 under the policy described in the original report.
For taxpayers, the Budget may therefore provide the next major indication of whether the Government intends to change direction.
Why the Treasury has resisted an £18,000 allowance
The Government’s previous response to the earlier petition was clear: it had no plans to increase the personal allowance to £18,000.
The Treasury argued that the proposal would cost more than £40 billion a year, a figure that illustrates the scale of the decision facing ministers. The precise cost of any future policy would need to be established through an updated official assessment, but the Government’s stated estimate shows why the proposal cannot be considered in isolation from wider public spending plans.
According to the previous response, a large increase in the allowance would significantly reduce tax receipts and leave less money available for public services, including hospitals and schools.
The Treasury also argued that raising the allowance would deliver larger cash benefits to higher earners than to people paying only basic-rate tax on lower incomes.
That is an important consideration in the debate over fairness. A person paying higher-rate tax may receive a larger cash benefit from an increase in the tax-free allowance, depending on the detailed structure of the system and the individual’s income.
Supporters of the proposal argue that this does not negate the benefits for ordinary workers. They believe that allowing people to keep more of their earnings is a straightforward way to ease financial pressure and reward employment.
Opponents counter that if the primary objective is to help the lowest-paid households, more targeted support could provide greater assistance for each pound spent.
The Treasury has previously pointed to other policies intended to support working families, including childcare provision, minimum-wage decisions and measures aimed at reducing household costs.
The central dispute is therefore not simply whether lower taxes would be welcome. It is how any tax reduction should be funded and whether the proposed allowance represents the most effective way to support people who are struggling financially.
Dale Vince’s alternative proposal adds to the debate
The campaign for a higher personal allowance has attracted support beyond the petition itself.
Ecotricity owner Dale Vince has argued that raising the allowance by £3,000 could produce a 1.2% boost to gross domestic product. He has also proposed financing the measure through changes to the Bank of England’s interest payments on commercial banks’ reserves.
The suggestion offers a different way of framing the issue: rather than treating a tax cut solely as lost revenue, supporters argue that putting more money into people’s pockets could stimulate spending and economic activity.
If households spend some of the additional income, businesses could benefit from increased demand. The overall economic effect, however, would depend on how the tax reduction was financed, how people used the extra money and how financial markets and public finances responded.
The claimed GDP boost should therefore be treated as an argument advanced by Vince, not as a guaranteed outcome.
Any proposal to change the Bank of England’s payments to commercial banks would also require detailed examination of the monetary-policy and financial implications. It cannot be assumed that such a change would generate the necessary funding without wider consequences.
For Healey, the proposal illustrates the range of ideas being put forward by supporters of tax reform. But the Treasury would need to assess both the projected economic benefits and the risks before committing to such a policy.
What happens next for taxpayers?
The new petition gives campaigners another opportunity to demonstrate public support for an increase in the threshold. However, petition signatures do not compel the Government to adopt the proposal, and the failure of the previous petition to reach 100,000 signatures does not prevent ministers from considering the issue independently.
The October 28 Budget is now a key date for anyone hoping to see a change. The Chancellor will have to weigh the cost of a tax cut against the Government’s spending commitments, economic forecasts and wider fiscal objectives.
There are several possible outcomes. The Government could announce a rise in the allowance, signal a future review, consider a smaller adjustment or retain the existing threshold freeze. Until an official announcement is made, none of these possibilities should be treated as confirmed.
For households, the practical question is whether the Budget will deliver a meaningful improvement in take-home pay or leave the current arrangements unchanged.
The petition’s supporters believe the £18,000 threshold would provide substantial relief and help reverse the impact of years of fiscal drag. The Treasury’s previous position suggests ministers remain concerned about the cost and distribution of the benefits.
The political pressure is clear. Burnham has indicated that the issue deserves consideration, while the new petition ensures that the demand for change remains visible.
But the Prime Minister’s earlier comments were not a promise, and the Chancellor will have to explain how any reform would be paid for.
Until the Budget provides a definitive answer, taxpayers should not assume that the personal allowance will rise to £18,000. The deadline for the original petition has passed, but the argument over income tax, frozen thresholds and the cost of living is far from over.
The new campaign has reopened the debate. Whether it changes government policy will depend not only on the number of people who sign, but also on whether ministers can find a credible way to balance tax relief with the funding of public services.
For millions of workers, October 28 may offer the clearest indication yet of whether the Government intends to turn its willingness to review the personal allowance into a concrete change—or whether the £12,570 threshold will remain in place for years to come.