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.

Calls Grow to Raise Personal Income Tax Allowance From £12,570 to £20,000 as Key Threshold Is Reached

A fresh debate over Britain’s tax system is gathering momentum as growing pressure mounts on the government to increase the personal income tax allowance from £12,570 to £20,000. Supporters of the proposal argue that millions of working people are paying too much tax and that raising the threshold could provide meaningful financial relief at a time when household budgets remain under enormous pressure.

The proposal has attracted attention from taxpayers, campaigners and opposition politicians who believe that ordinary workers deserve to keep more of the money they earn.

With food prices, mortgage payments, rent, energy bills and other everyday expenses continuing to affect household finances, the question of how much income people can earn before paying tax has become increasingly important.

For many families, an increase to £20,000 could make a significant difference.

What Is the Personal Income Tax Allowance?

The personal allowance is the amount of income an individual can earn each tax year before paying basic-rate income tax.

In the 2026/27 tax year, the standard personal allowance in England, Wales and Northern Ireland remains £12,570.

This means that someone earning £12,570 or less generally does not pay income tax on their earnings, subject to the applicable rules.

Income above the allowance is normally subject to income tax at the relevant rate.

However, the personal allowance is gradually withdrawn for people earning more than £100,000, disappearing entirely once their income reaches £125,140.

The allowance has remained frozen at £12,570 since April 2021.

Critics argue that keeping the threshold unchanged while wages and prices increase has effectively pushed more people into paying tax on a greater proportion of their earnings.

This is commonly known as fiscal drag.

Why Are People Calling for an Increase to £20,000?

Supporters of the proposed £20,000 allowance believe the existing threshold no longer reflects the financial pressures facing ordinary households.

When the personal allowance was introduced at its current level, many people were already concerned about the rising cost of living.

Since then, inflation and wage increases have changed the financial circumstances of millions of workers.

However, the tax-free threshold has not increased accordingly.

Campaigners argue that raising it to £20,000 would help restore the purchasing power of workers and allow people to retain more of their earnings.

They also believe that the change could provide an incentive for employment, particularly for people considering additional working hours.

For lower and middle-income households, even a relatively modest reduction in income tax could help with essential expenses.

How Much Could Workers Save?

The financial impact of increasing the personal allowance to £20,000 would depend on an individual’s income and applicable tax arrangements.

For someone earning £20,000 annually, the current standard allowance means that £7,430 is subject to basic-rate income tax.

At a rate of 20 per cent, this represents £1,486 in income tax before other adjustments.

Under a hypothetical £20,000 personal allowance, someone earning exactly £20,000 would pay no income tax on their employment income.

For someone earning £30,000, the difference between the two thresholds could represent up to £1,486 in annual income tax savings, assuming the same basic-rate structure and no other relevant adjustments.

<text color=”secondary” size=”xs”>Illustrative calculations for England, Wales and Northern Ireland, excluding National Insurance and other deductions. This is a proposed change, not an announced government policy.</text>

The figures demonstrate why the proposal has attracted attention among workers who feel that taxation is taking an increasingly large share of their earnings.

Pensioners Could Also Benefit

The debate is not limited to people currently in employment.

Many pensioners receive income from the State Pension, private pensions and workplace retirement schemes.

Some older people have relatively modest retirement incomes but still pay income tax because their combined taxable income exceeds the personal allowance.

Increasing the threshold could therefore provide additional financial relief for pensioners who rely on fixed incomes.

This could be particularly important for people facing higher heating costs, food prices and other retirement expenses.

However, the government would need to consider how a higher allowance would interact with existing pension and benefit arrangements.

What Would It Mean for the Government?

Although increasing the personal allowance could benefit taxpayers, it would also create a substantial challenge for public finances.

Income tax is one of the government’s largest sources of revenue.

Raising the allowance from £12,570 to £20,000 would mean that less income is subject to taxation, reducing the amount collected unless the government introduced other measures to compensate.

The overall cost would depend on the number of taxpayers affected, their incomes and the wider structure of the tax system.

Ministers would need to explain how the change could be financed without placing additional pressure on public services.

The NHS, education, defence, social care and local government all depend heavily on public funding.

This creates a difficult political balancing act between reducing taxes and maintaining essential services.

Labour Under Pressure Over Taxation

The proposal could create further pressure on Labour, particularly among voters who expected the government to improve living standards.

Many workers are frustrated by the combination of income tax, National Insurance, housing costs and everyday expenses.

Some believe that the government should prioritise reducing the tax burden rather than introducing additional spending commitments.

Opposition politicians may use the proposal to challenge Labour over its approach to taxation and household finances.

Reform UK and the Conservatives could also seek to attract voters by presenting themselves as stronger advocates of tax reductions.

However, any party promising a £20,000 allowance would need to explain how it intends to fund the reduction in tax revenue.

Is a £20,000 Personal Allowance Realistic?

The proposal is attractive because it offers a straightforward message: people should be allowed to keep more of what they earn.

Nevertheless, introducing such a major change would require careful economic planning.

The government would need to consider:

• The estimated reduction in annual tax revenue.
• Whether public spending would need to be reduced.
• How the change would affect different income groups.
• Whether the higher allowance would affect other tax thresholds.
• How the policy would interact with Scotland’s separate income tax system.

Scotland has different income tax bands and thresholds for many taxpayers, so a UK-wide proposal would require additional consideration.

There is also the question of whether increasing the personal allowance is the most effective way to help lower-paid workers. Some people on very low incomes already earn less than the existing threshold, meaning they would receive little or no direct benefit.

A carefully designed policy would therefore need to consider how financial support reaches those who need it most.

Conclusion

The growing debate over increasing Britain’s personal income tax allowance from £12,570 to £20,000 highlights the financial pressure facing millions of households.

Supporters believe that workers deserve to retain more of their earnings and argue that the existing threshold has failed to keep pace with changes in wages and the cost of living.

A higher allowance could provide meaningful savings for many taxpayers, including some pensioners.

However, the government would also face difficult questions about lost tax revenue and the funding of essential public services.

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

The key question for politicians is whether they are prepared to make reducing the tax burden on ordinary workers a genuine priority.

At a time when households are struggling to make their money go further, the demand for a fairer and more affordable tax system is unlikely to disappear.