A campaign calling on Chancellor John Healey to take action over frozen tax thresholds has hit a key threshold – meaning the Treasury must respond. In last month’s budget, Mr Healey failed to act despite widespread calls for change.

A petition on the Parliament website is demanding that the lowest level of tax – currently £12,570 – be raised to £20,000. Income tax thresholds have remained frozen since 2021 and, under existing plans, will continue to do so until 2031.

Now the call – which has only until Saturday to run – has smashed through 10,000 signups meaning officials must give an official answer. Prime Minister Andy Burnham has faced pressure and speculation regarding potential changes to UK income tax thresholds.

Frozen at £12,570 since April 2021, the policy has been extended until 2031 – and in last month’s Budget Mr Healey did not make any change to this. This freeze has continued to pull more earners into paying income tax or higher brackets as wages rise.

As a result, some of the lowest-paid workers are being forced to hand over ever-increasing sums in tax, in what is commonly referred to as ‘fiscal drag’. The basic Personal Allowance in the UK stands at £12,570 for the 2026/27 tax year – the amount one can earn annually before becoming liable for 20 per cent income tax.

The higher 40% rate applies from £50,271, while the additional 45% rate kicks in at £125,140. Independent figures indicate that a basic-rate earner (£20k-£50k) pays approximately £700 to £800 more in tax each year solely as a consequence of the freeze.

The petition, created by Wade Reid, states: “The personal allowance has been frozen while living costs have risen, meaning workers pay more tax in real terms. Increasing it to £20,000 would put more money into millions of workers’ pockets, helping with rising bills and supporting low and middle earners.

“The personal allowance has been frozen since 2021 while living costs have risen sharply, meaning workers are paying more tax in real terms. As wages increase slightly to keep up with inflation, more people are pulled into paying tax or higher rates. Increasing the threshold to £20,000 would put more money into millions of workers’ pockets, ease financial pressure, and support low and middle earners during a cost of living crisis.”

Mr Healey made no adjustments to the allowances in the Budget – though he indicated to ITV audiences that potential ‘bigger changes’ could be forthcoming. During his ITV programme, personal finance expert Martin Lewis shared a question from viewer Michael: “Will the Chancellor be honest and admit he’s raising taxes on working people by stealth by continuing the freeze on tax thresholds? He is being totally disingenuous.”

Martin enquired: “When will you raise tax thresholds?” Mr Healey responded: “Well, our promise was not to raise rates across the board and this was a budget unlike in some previous years where I rejected the idea of broad-based tax rises because it isn’t just businesses, it’s individuals and households that are under pressure.

“So where I could avoid that, I decided I should do that. And it was a budget, if you step back, that was designed to take action where we could just to help take a bit of pressure off people, give people a bit of breathing space, which we’ve done, especially on energy. And it was a budget also designed to try and do that a bit for business.”

“So where I could avoid that, I decided I should do that. If you step back, that was designed to take action where we could just to help take a bit of pressure off people, give people a bit of breathing space, which we’ve done, especially on energy. And it was a budget also designed to try and do that a bit for business.”

However, Martin challenged the claims regarding working people’s taxes – arguing that fiscal drag was achieving precisely that: “Forgive me, this specific question. You said in the speech yesterday, we are not raising taxes on working people. Well, by all definitions, the fiscal drag, the freezing of the tax thresholds is the biggest tax that has ever been raised in recent history. You accept you are while you’re not raising tax rates, you are increasing taxes.”

Mr Healey said: “In truth, it is part of any government’s revenue and judgments about thresholds as well as rates are part of the judgments that have to be taken, and the plans for the thresholds have been set for the next few years. And I took the decision in this budget that I wouldn’t touch those and I would do what I can where I could to help people. And then make some bigger changes for the long term. Because fundamentally we’ve got parts of our system that needs fixing.”

Fiscal drag happens when the government maintains frozen tax thresholds while inflation and nominal earnings increase. Rather than explicitly increasing tax rates, the Treasury secures additional revenue because a greater proportion of workers’ pay exceeds the frozen limits.

According to the latest HMRC figures, there are 31.4 million basic-rate taxpayers nationwide. That marks a 15% increase in the number of individuals paying income tax at 20% since tax bands were frozen at 2021 levels.

A total of 7.7 million people are expected to pay the higher rate this year – a rise of a million compared to two years previously. An additional 1.3 million individuals are forecast to pay the 45% additional rate – significantly more than the 263,000 people paying it in 2010-11 when it was first introduced.

Had the threshold risen in keeping with inflation, it would sit at roughly £16,072 next year and £17,380 by 2029-30, according to research by AJ Bell. Were Mr Burnham to opt for raising the personal allowance to £16,000, this would carry a price tag of approximately £35bn, the investment platform noted.

Lifting the allowance by just £100 would set the Treasury back around £1bn each year. View and back the petition here.

HUGE TAX-FREE PAY RISE DEMAND: Britons Want Personal Allowance Increased From £12,570 to £20,000 – Government Faces Growing Pressure!

Millions of British workers could benefit from a major change to the income tax system if a growing public campaign succeeds in persuading the government to increase the Personal Allowance from £12,570 to £20,000.

The proposal has attracted significant attention after an online petition passed the 10,000-signature threshold, triggering the requirement for an official government response.

For ordinary workers struggling with household bills, rent, mortgages and everyday expenses, the campaign represents a wider demand for a fairer tax system.

The central argument is straightforward: people should be allowed to keep more of the money they earn before income tax becomes payable.

However, the proposal also presents a significant challenge for the Treasury, which must balance tax relief against the cost of funding public services.

With the cost of living continuing to dominate household financial concerns, the debate over Britain’s tax-free allowance is becoming increasingly important.

What Is the £20,000 Tax-Free Allowance Proposal?

Currently, the standard Personal Allowance in the UK is £12,570.

This means that most individuals can earn up to this amount during a tax year before paying income tax.

Under the proposal, the threshold would increase to £20,000.

In practical terms, this would mean that an additional £7,430 of annual income would fall within the tax-free allowance for eligible taxpayers.

Supporters argue that such a change would provide meaningful financial relief, particularly for workers on low and middle incomes.

The campaign highlights the fact that the existing threshold has remained unchanged for several years, despite substantial increases in living costs.

For many households, wages have risen partly to keep up with inflation. However, when tax thresholds remain frozen, workers can find themselves paying more income tax as their nominal earnings increase.

This effect is commonly known as fiscal drag.

Why Workers Are Calling for Change

The cost of everyday life has become a major concern for millions of households.

Food shopping, electricity, gas, transport, housing and insurance can consume a substantial proportion of monthly earnings.

Workers who receive modest pay increases may discover that their additional income does not translate into a significant improvement in their financial position.

The campaign for a £20,000 allowance is based on the argument that the government should allow people to retain more of their earnings.

For someone working full-time on a relatively modest salary, an increase in the tax-free threshold could make a noticeable difference.

Supporters also argue that allowing workers to keep more money could increase consumer spending.

Households might use additional disposable income to pay outstanding bills, reduce debt, save for emergencies or purchase essential goods.

That could potentially benefit local businesses and the wider economy.

However, the actual financial benefit would depend on individual circumstances and the way any increase was implemented.

What Does Fiscal Drag Mean?

Fiscal drag is one of the most important issues behind the current campaign.

It happens when tax thresholds remain frozen while wages and prices increase.

Imagine a worker whose salary rises from £12,500 to £14,000.

Under a system with a £12,570 Personal Allowance, that worker would begin paying income tax on the portion of earnings above the threshold.

If the threshold had increased alongside inflation, the amount of income subject to tax could be lower.

This is why critics describe frozen thresholds as a form of stealth taxation.

The government does not necessarily need to increase the headline income tax rate to collect additional revenue.

Instead, more people can become taxpayers, while existing taxpayers may see a larger proportion of their earnings become taxable.

The effect can be particularly difficult for households whose salaries are increasing only slightly faster than the cost of living.

Why the Government Has Not Approved the Increase

Although the petition has generated attention, increasing the Personal Allowance to £20,000 would involve a substantial reduction in government tax revenue.

The Treasury relies on income tax to finance essential public services, including hospitals, schools, transport and other public infrastructure.

Reducing income tax receipts on this scale would therefore require difficult decisions.

The government could potentially consider alternative tax changes, spending reductions or additional borrowing, but each option would have wider economic consequences.

In its parliamentary response to the petition, the government stated that it had no plans to increase the Personal Allowance to £20,000.

It argued that the proposal would come at a significant fiscal cost and reduce the money available for essential public services.

This means that reaching the 10,000-signature threshold does not guarantee a policy change.

It simply requires the government to respond officially.

How Much Could Workers Save?

The potential savings are one of the biggest reasons the proposal has attracted public interest.

Under the current standard allowance, the first £12,570 of eligible income is tax-free.

If that allowance increased to £20,000, an additional £7,430 would become tax-free.

For someone paying the basic income tax rate of 20%, the maximum straightforward annual income tax reduction could be:

£7,430 × 20% = £1,486.

That represents approximately £123.83 per month.

However, this is an illustrative calculation rather than a guaranteed saving for every worker.

The actual effect would depend on income, existing allowances, pension arrangements and the way the government structured the reform.

There would also be different consequences for people with higher incomes because the Personal Allowance is gradually withdrawn once adjusted net income exceeds £100,000.

Nevertheless, the calculation demonstrates why the proposed change has attracted attention.

For households managing tight monthly budgets, an additional amount of disposable income could be significant.

Could the Change Help Pensioners?

The debate is also relevant to pensioners who receive taxable private pensions or other taxable income.

Many older people face rising household costs and may have limited opportunities to increase their income.

An increase in the Personal Allowance could reduce the income tax paid by pensioners whose taxable income falls within the relevant bands.

However, people whose income comes entirely from certain tax-free benefits would not necessarily receive the same direct benefit.

The proposal would therefore need to be examined carefully to understand which groups would gain the most.

It is also important to consider the relationship between the Personal Allowance, the State Pension and other retirement income.

Would a £20,000 Allowance Be Fair?

Not everyone agrees that increasing the tax-free allowance is the best way to help struggling households.

Supporters argue that workers should keep more of their earnings and that the existing threshold has not kept pace with changes in the economy.

Critics point out that higher-income taxpayers could receive larger cash benefits from an increase in the allowance.

They also argue that reducing income tax revenue could create additional pressure on public services.

Another concern is that the government might eventually need to raise other taxes to compensate for the lost revenue.

This could reduce the overall benefit for some households.

The question is therefore not simply whether people want to pay less tax.

It is also about how tax relief should be distributed and how the government should finance public services.

What Happens After the Petition Reaches 10,000 Signatures?

The 10,000-signature milestone is an important procedural development.

Under the UK Parliament’s petition system, the government is required to respond to petitions that reach this threshold.

However, an official response is not the same as a parliamentary vote or a commitment to introduce legislation.

A petition reaching 100,000 signatures can be considered for debate in Parliament, although a debate is not automatically guaranteed.

The campaign therefore still faces an important challenge.

Its supporters must persuade policymakers that increasing the Personal Allowance is financially realistic and that the benefits justify the cost.

The government, meanwhile, must explain why it believes the current threshold should remain in place.

The Bigger Question: Who Should Benefit From Britain’s Tax System?

The debate over the Personal Allowance highlights a much wider question about the relationship between taxation, public services and living standards.

Workers want to see a meaningful return for their efforts.

Families want financial stability.

Pensioners want security in retirement.

Businesses want employees to have enough disposable income to support consumer demand.

At the same time, the government needs sufficient revenue to maintain essential services and manage public finances responsibly.

Finding the right balance is not straightforward.

A £20,000 Personal Allowance would represent a major change to the British tax system, and its consequences would extend beyond individual payslips.

It would affect government revenue, household finances and the distribution of tax benefits across different income groups.

Will the Government Finally Listen?

The petition reaching 10,000 signatures has ensured that the issue receives an official response, but the campaign is far from over.

The government has so far rejected the proposed increase, citing the substantial financial cost.

Nevertheless, the debate over frozen tax thresholds is likely to remain an important issue for workers and families.

As households continue to examine their finances, many will want to know whether future budgets will provide meaningful relief.

For now, the £20,000 proposal remains a campaign demand rather than an approved tax change.

THE BIG QUESTIONS:

• Should Britain’s Personal Allowance increase from £12,570 to £20,000?
• Would an additional £123 per month make a meaningful difference to your household?
• Should the government prioritise tax cuts for workers or protecting public services?
• Is keeping tax thresholds frozen a fair way to raise government revenue?
• Should Parliament give the £20,000 proposal further consideration?

One thing is clear: the debate over how much ordinary Britons should keep from their earnings is far from over.