Pressure growing on Chancellor Rachel Reeves over ‘so wrong’ freeze for lowest band
Chancellor Rachel Reeves is being urged to raise the lowest tax threshold (Image: Getty)
Support is soaring for a new call for Chancellor Rachel Reeves to raise the lowest income tax threshold to £18,000. A new petition on the parliament website has soared in support since it was created – and it is urging Ms Reeves to reverse her decision to freeze the lowest income tax threshold of £12,570 until 2031.
In the November budget, Chancellor Rachel Reeves extended the tax thresholds freeze to 2031. For the 2026/27 tax year, the standard UK Personal Allowance remains frozen at £12,570, meaning no income tax is paid on earnings up to this amount.
Some of Britain’s most financially vulnerable workers face being taxed the moment their earnings exceed that figure – and because it has remained unchanged, inflation and wage growth mean that considerably more people are now liable for tax than would otherwise have been the case had it risen in line with historical precedent.
The petition, which can be viewed here, said: “Raise the personal tax allowance to £18,000. Since 2021 personal tax allowance has been frozen at £12,570. This freeze was due to expire this year but the Chancellor of the Exchequer has extended it to 2031. We want to keep some more of our own money.
“If you are earning minimum wage then you may soon be paying tax because of fiscal drag. Some higher earners pay little or no tax due to clever use of accounting rules. We think this is so wrong.”
Forecasts suggest that by 2027, the new state pension will exceed this figure owing to the triple lock mechanism, meaning pensioners would be at risk of paying more tax. The issue has generated several petitions, illustrating the intensity of public feeling across the country. Earlier in the year, one appeal calling for the threshold to rise to £20,000 amassed a remarkable 281,792 signatures on the Parliament platform before being closed to further support during the summer months.
This prompted a Westminster debate where the Treasury estimated the financial impact at £50 billion. Highlighting the extent of public anxiety, a new petition has subsequently emerged pressing for the income tax personal allowance to increase from £12,570 to £20,000.
The earlier petition’s position amongst the most signed in the parliamentary website’s history was interpreted by activists as compelling evidence of widespread public sentiment regarding this issue. At present, a standard tax rate of 20 per cent is levied on earnings beyond £12,570, whilst those on higher incomes face a 40 per cent rate on amounts surpassing £50,270 – both limits have stayed unchanged since 2021.
Central to the controversy is ‘fiscal drag’, a situation arising from the personal income tax allowance remaining fixed at £12,570 since 2021. During a Westminster Hall debate in the Commons earlier this year, Liberal Democrat Daisy Cooper highlighted the substantial public support as indicative of the nation’s sentiment: “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 cautioned that increasing the tax threshold would impose a considerable financial burden. “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.”
A leading think-tank has predicted that working-age households will be approximately £500 worse off on average over the coming year as a result of frozen income tax thresholds. It is the most financially vulnerable who stand to bear the greatest burden – a newly published report by the Resolution Foundation, released ahead of the new tax year, found that the bottom 10 per cent of earners will be at the ‘sharp end’.
The report stated that shifts in energy and fuel prices alone could mean lower-income households experience a rate of inflation almost a percentage point higher than those in the top income ten per cent by the close of this year – according to fresh analysis published by the Resolution Foundation.
The Resolution Foundation explained a “triple hit” as the new tax year got under way in April, with households contending with the combined pressures of taxation, rising utility bills, and substantial increases to council tax. It noted that families in particular will be around £500 worse off owing to the freeze on the personal tax allowance.
In the November budget Chancellor Rachel Reeves extended the tax thresholds freeze to 2031. For the 2026/27 tax year, the standard UK Personal Allowance remains frozen at £12,570, meaning no income tax is paid on earnings up to this amount. The basic rate (20%) applies up to £50,270, higher rate (40%) up to £125,140, and additional rate (45%) on income above £125,140.
To view and back the petition click here.