MPs intervened as public pressure mounts on Chancellor Rachel Reeves to increase the personal tax allowance from £12,570 to a staggering £45,000. The current threshold, frozen since 2021, has resulted in some of the UK’s lowest earners paying more income tax.

A petition on the Parliament website, which has amassed 43,626 signatures, is challenging what many see as an ‘unjust’ tax hike, often referred to as ‘fiscal drag’ – and got a response from the Government. However an influential committee decided the Treasury response was inadequate and has ordered a new response to answer the questions in a strong rebuke.

Denver Johnson, the petitioner, stated: “The Personal Allowance is the amount of income a person can get before they pay tax. It stands at £12,570 in 2024. We would like the standard Personal Allowance raised to what we think is a more realistic figure of £45,000.”

He further argued: “We think that the Personal Allowance, as termed by the government, has been kept unreasonably low for far too long, at the expense of the poorest, most needy people in our society. We feel that the poorer majority should pay substantially less than the wealthy. We think that the tax system seems designed to make the divide between rich and poor increase exponentially.”

Since 2021, the income tax threshold has been frozen, dragging millions of low earners into the tax net through ‘fiscal drag’. The basic 20% tax rate kicks in at £12,570, while the higher 40% rate starts at £50,270 – both thresholds have remained unchanged since 2021.

Experts estimate that by the end of the freeze in 2028, this will have raised £1.2 billion for the Treasury. This phenomenon, known as ‘fiscal drag’, results in more individuals being liable for taxation or moving into higher tax bands, with analysts highlighting the particular burden on those with lower incomes

The petition on the parliamentary website, having surpassed 10,000 signatures, was due a response and has now received one from the Treasury, which is currently under scrutiny. The Treasury stated: “The Government has not extended the last Government’s freeze on personal tax thresholds, meaning from April 2028 working people will keep more of their earnings as thresholds will rise by inflation.”

They further clarified, “The previous Government made the decision to freeze the income tax Personal Allowance (PA) at its current level of £12,570 until April 2028. The current 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. As a result, they will rise with inflation from April 2028, meaning working people will keep more of their earnings.

“Increasing the Personal Allowance to £45,000 would come at a significant fiscal cost of more than £270 billion per annum on average over the next three years (based on HMRC’s ready reckoners, published here). 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.”