A campaign to increase the earnings threshold before workers pay tax received a response from the Treasury last week and is set for debate in Parliament after a petition exceeded 100,000 signatures. This significant number necessitated a Government response and clarification of its stance.
On Monday, March 3, the petition on the Parliament website had topped 170,000 signatures. Petitions that surpass 100,000 are debated in the House of Commons.
The campaign calls for Chancellor Rachel Reeves to raise the personal tax allowance from its current £12,750 to £20,000. This figure has remained unchanged since 2021, meaning that as salaries rise due to company pay increases, more individuals are pulled into the tax bracket – a phenomenon known as ‘fiscal drag’.
The petition, initiated by Alan Frost, advocates for the increase “to help low earners get off benefits and allow pensioners a decent income”. As the state pension increases, some pensioners find themselves back in the tax bracket.
Last week, the Treasury responded, stating: “The Government is committed to keeping taxes for working people as low as possible while ensuring fiscal responsibility. The Government is committed to keeping taxes for working people as low as possible while ensuring fiscal responsibility and so, at our first Budget, we decided not to extend the freeze on personal tax thresholds.
“The Government has no plans to increase the Personal Allowance to £20,000. Increasing the Personal Allowance to £20,000 would come at a significant fiscal cost of many billions of pounds per annum. This would reduce tax receipts substantially, decreasing funds available for the UK’s hospitals, schools, and other essential public services that we all rely on.
“It would also undermine the work the Chancellor has done to restore fiscal responsibility and economic stability, which are critical to getting our economy growing and keeping taxes, inflation, and mortgages as low as possible. The Government keeps all taxes under review as part of the policy making process. The Chancellor will announce any changes to the tax system at fiscal events in the usual way.”
While a rise to £20,000 seems unlikely, it is possible the Chancellor will look to some sort of increase in her next ‘fiscal event’, which will be what’s known as the Spring Statement on March 26.
Current HMRC personal tax rates and allowances
According to HMRC, how much Income Tax you pay in each tax year depends on:
- how much of your income is above your Personal Allowance
- how much of your income falls within each tax band
Some income is tax-free. The current tax year is from April 6, 2024, to April 5, 2025.
Tax-free personal allowance
The standard personal allowance is £12,570, which is the amount of income you do not have to pay tax on. It decreases if your income is over £100,000. For every £2 you earn over £100,000, you lose £1 of your tax-free personal allowance.
Blind Person’s Allowance
If you claim Blind Person’s Allowance, you might be able to earn more before you start paying Income Tax. This tax-free allowance is added to your personal allowance.
Income Tax rates and bands
The table shows the tax rates you pay in each band if you have a standard personal allowance of £12,570. Income tax bands are different if you live in Scotland.
| Band | Taxable income | Tax rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | over £125,140 | 45% |
You can also see the rates and bands without the personal allowance. You do not get a personal allowance on taxable income over £125,140.
If you’re employed or get a pension
Check your Income Tax to see:
- your personal allowance and tax code
- how much tax you’ve paid in the current tax year
- how much you’re likely to pay for the rest of the year
Other allowances
You have tax-free allowances for:
You may also have tax-free allowances for:
Find out whether you’re eligible for the trading and property allowances. You pay tax on any interest, dividends or income over your allowances.
Paying less Income Tax
You may be able to claim Income Tax reliefs if you’re eligible for them.
If you’re married or in a civil partnership
You may be able to claim Marriage Allowance to reduce your partner’s tax if your income is less than the standard personal allowance. If you do not claim Marriage Allowance and you or your partner were born before 6 April 6, 1935, you may be able to claim Married Couple’s Allowance.
