Chancellor Rachel Reeves has been urged to increase the lowest personal tax threshold (Image: Getty)
A campaign to raise the threshold for income tax has taken a step forward as a new petition was started. The personal tax allowance has been frozen at ￡12,570 since 2021 - a state of arrairs which has been described as ‘ridiculous’.
It means that some of the poorest workers pay tax as soon as they earn over that amount - and as it has frozen inflation and pay increases mean that millions more are paying it than otherwise would have if it had risen as normal.
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A petition demanding the level be elevated to ￡20,000 amassed a staggering 281,792 signatures on the Parliament website before ceasing to accept new supporters earlier this summer. This also sparked a Parliamentary debate during which the treasury estimated the cost at ￡50 billion.
Showing the strength of feeling, a new petition has been started calling for the income tax personal allowance to be raised from ￡12,570 to ￡20,000. The petition, created by Shannon Keene says: “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 their whole income!
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“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.”
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Organisers hope it could put pressure on Chancellor Rachel Reeves before the next budget in November this year.
The fact that the previous petition was one of the biggest ever on the parliament website was taken by campaigners as evidence of the intense public sentiment surrounding the issue. At present, the basic tax rate of 20% applies to earnings above ￡12,570, while higher earners are subject to the 40% rate on income exceeding ￡50,270 - both thresholds have remained unchanged since 2021.
Read more: Personal tax allowance increase to ￡20,000 update 'in days' in Commons showdown
Read more: Major state pension personal tax threshold update as Treasury gives response
The controversy centres around the concept of ‘fiscal drag’, which is tied to the fact that the personal income tax allowance has been frozen at ￡12,570 since 2021. In the debate earlier this year at Westminster Hall in the House of Commons, Daisy Cooper, a Liberal Democrat, stated that the overwhelming support demonstrated 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 showing 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, informed the debate that the projected cost of raising the threshold to ￡20,000 was significantly high. He clarified: “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.
"Conservative and Reform MPs may have cheered Liz Truss on, but like the British people, we in the Labour party know the damage that that caused, and we will never let it happen again.
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Millions of workers over State Pension age could be due a pay boost from employer
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Rachel Reeves 'eyeing up new ￡2bn tax raid' and this time doctors are the target
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POLL: Should Rachel Reeves force Britain's richest people to pay more tax?
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Tax-free Personal Allowance increased to ￡13,830 for ‘backdating' households
DWP State Pension petition hits 10,500 signatures for ￡586 weekly boost
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Disaster for Keir Starmer as nearly 900k demand immediate general election
Rachel Reeves 8 potential Autumn budget tax hikes - from inheritance to pensions
Labour urged to raise council tax by 410% - 10 areas that would get biggest increases
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Labour statement on changes to personal allowance for state pensioners
Make state pension ‘tax exempt' update as powerful MPs demand new Rachel Reeves answer
Rachel Reeves set to 'tax living daylights' out of Brits as Mel Stride issues warning
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Rachel Reeves will torpedo trust if she breaks major tax promise
Major HMRC tax change within months for tens of thousands of people
Millions of workers over State Pension age could be due a pay boost from employer
Martin Lewis urges Brits to double-check their payslips
Rachel Reeves 'eyeing up new ￡2bn tax raid' and this time doctors are the target
Rachel Reeves humiliated as Starmer's latest move shows he's lost all confidence in her
Keir Starmer's approval ratings hit new record low as UK turns on PM's Labour government
POLL: Should Rachel Reeves force Britain's richest people to pay more tax?
New calls to scrap Triple Lock pension system to fund students
"To put it another way, if ￡50 billion was taken out of public services, that would be equal to wiping out almost the entire UK defence budget or slashing the NHS by a quarter. The British people will not be the winners if public services collapse or chaos returns to the economy.”
The debate can be viewed here.
To see and back the new petition, click here.
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