Andy Burnham’s Call to Raise the £18,000 Personal Tax Allowance Hits a Key Threshold

Andy Burnham’s intervention on the personal tax allowance has put a long-running tax debate firmly back into the political spotlight. A proposal to raise the amount people can earn before paying income tax to £18,000 has attracted growing attention, while the government faces difficult questions over whether such a change could realistically be afforded.

The issue matters because the personal allowance affects millions of workers. At present, the standard allowance is £12,570, meaning most people can earn that amount before income tax becomes payable. The allowance has remained frozen for years, and official figures confirm that it is set at £12,570 for the 2026/27 tax year.

Raising it to £18,000 would therefore represent a substantial increase.

For workers on modest and middle incomes, that could mean a noticeable reduction in their tax bill. For the Treasury, however, it could mean billions of pounds less revenue at a time when public finances are already under considerable pressure.

That is why Burnham’s position has attracted so much attention.

Why the £18,000 figure matters

The idea behind a higher personal allowance is relatively simple.

If someone earns £18,000 a year and the allowance were also £18,000, they would pay no income tax on their earnings, assuming they were eligible for the standard allowance.

Under the current system, however, the first £12,570 is tax-free and the remaining £5,430 would normally fall into the basic-rate income-tax band.

At the current basic rate of 20%, that difference could amount to £1,086 a year in income tax for someone earning £18,000, assuming the full increase applied and ignoring other factors.

For someone earning £25,000, the tax saving would be similar if the allowance increased from £12,570 to £18,000.

That is why supporters describe the proposal as a potential boost for working households.

It would effectively allow people to keep more of their wages.

For families struggling with food, energy, rent, mortgage payments and other household costs, even a few hundred pounds a year can make a meaningful difference.

The allowance has been frozen for years

One of the strongest arguments for increasing the allowance is that £12,570 today does not have the same purchasing power it had when the threshold was introduced.

The government has kept the allowance fixed for an extended period. The House of Commons Library confirms that the personal allowance has remained at £12,570 and is currently scheduled to stay at that level until April 2031.

This creates an important political problem.

As wages rise over time, more people can find themselves paying tax even when their real economic position has not improved dramatically.

This phenomenon is commonly described as fiscal drag.

The government does not necessarily need to increase tax rates to collect more money. If thresholds remain frozen while wages increase, more income gradually becomes taxable.

For taxpayers, the effect can be difficult to notice at first.

A worker receives a pay rise and may feel better off, only to discover that a larger portion of their income is now subject to tax.

Over many years, the cumulative effect can become significant.

What would £18,000 mean for ordinary workers?

The attraction of the proposal becomes clearer when looking at individual examples.

Imagine a worker earning £20,000 a year.

Under the current £12,570 allowance, £7,430 would be subject to the basic 20% income-tax rate, producing a theoretical income-tax liability of around £1,486 before considering other deductions and allowances.

If the tax-free threshold were raised to £18,000, only £2,000 would be taxable at the basic rate.

The resulting income-tax liability would fall to approximately £400.

That would mean a difference of more than £1,000 a year.

For a household living close to the financial margin, that could be substantial.

It could help pay for groceries, transport, utility bills or childcare.

But this is also where caution is necessary.

Income tax is only one part of a worker’s overall deductions. National Insurance, pension contributions and other factors can affect take-home pay.

A higher personal allowance therefore would not mean that every worker suddenly received an extra £1,000 in their bank account.

Nevertheless, the potential effect would be significant.

The Treasury faces the difficult part

The problem is not whether taxpayers would benefit.

They almost certainly would.

The difficult question is who would pay for the change.

Every pound of tax that is not collected must be replaced through spending reductions, additional borrowing, other taxes or stronger economic growth.

A petition calling for the personal allowance to rise to £18,000 has attracted significant public attention. Recent reporting has highlighted growing support for the proposal, while the Treasury has previously responded to a petition on the issue.

But popularity does not automatically make a policy affordable.

The larger the allowance increase, the greater the potential cost to the Exchequer.

That is particularly important because the proposed jump from £12,570 to £18,000 is not a small adjustment.

It represents an increase of £5,430, or more than 40%.

Burnham’s political dilemma

For Burnham, the issue creates an interesting political opportunity.

A higher personal allowance is easy for voters to understand.

Rather than offering a complicated tax credit or targeted benefit, the government could simply say: “You can earn more before the taxman takes a share.”

That message could be particularly powerful among lower-paid workers and households on modest incomes.

It also fits into a wider political argument about living standards.

If wages have risen but tax thresholds have remained frozen, voters may reasonably ask why they should continue paying more tax simply because the government has not adjusted the allowance.

Burnham could therefore portray an increase as a way of putting money back into people’s pockets.

But the political risk is equally obvious.

If the government announces a major tax cut while simultaneously facing pressure over public services, borrowing and government spending, critics will immediately ask where the money will come from.

The wider tax burden

There is another complication.

Even if the personal allowance rises, taxpayers could still feel pressure from other parts of the tax system.

Income tax is only one element of the overall burden.

National Insurance, council tax, VAT, fuel duties, business taxes and other charges all affect household finances.

A government could therefore increase the personal allowance while simultaneously raising other taxes.

The overall effect on households would depend on the complete Budget package.

That is why taxpayers should look beyond one headline figure.

A £5,430 increase in the tax-free allowance sounds dramatic, but the real question is how it would interact with tax rates, National Insurance thresholds and government spending decisions.

What about higher earners?

Another important question is who would benefit most.

A higher personal allowance gives a tax saving to people with taxable income above the existing threshold, provided they are not affected by the rules that withdraw the allowance at higher incomes.

The government currently begins withdrawing the personal allowance once adjusted net income exceeds £100,000. It is completely withdrawn once income reaches £125,140.

That means the policy would not necessarily benefit every taxpayer equally.

For lower and middle earners, however, the change could be particularly noticeable because a greater proportion of their income sits close to the personal allowance.

This is one reason supporters argue that the policy could strengthen incentives to work.

If people keep more of the first pounds they earn, taking additional hours or moving from part-time to full-time employment may become more financially attractive.

Could it encourage people to work more?

This is one of the strongest economic arguments in favour of a higher allowance.

Taxes affect the reward people receive from working.

If someone on a relatively low income knows that the first £18,000 is tax-free, they may have a greater incentive to increase their working hours or return to employment.

That could potentially increase labour supply.

More people working could, in turn, increase economic output and generate additional tax revenues elsewhere.

However, economists would also point out that the size of this effect is uncertain.

Not everyone who receives a tax cut will work more hours.

Some people may simply use the additional money to cover higher living costs.

Others may save it.

Some may reduce debt.

All of those outcomes could still be beneficial to households, but they would have different consequences for the economy.

The argument about fiscal drag

The £18,000 proposal also reflects a much broader debate about fiscal drag.

When tax thresholds are frozen, governments can collect more revenue over time without announcing an explicit increase in tax rates.

This can be politically convenient.

The government does not have to stand at the dispatch box and say that it is increasing the basic rate from 20% to 21%.

Instead, taxpayers gradually move into taxable income because their wages increase while the threshold stays still.

The result can nevertheless feel like a tax rise.

That is why some campaigners want thresholds to rise automatically with inflation or wages.

Such a system would prevent governments from quietly increasing the tax burden through prolonged freezes.

The downside is that automatic increases would make it harder for governments to raise additional revenue through fiscal drag when public finances are under pressure.

The £18,000 proposal is not yet the same as government policy

This distinction is extremely important.

Public discussion about a possible £18,000 allowance should not be confused with an official decision to introduce one.

Recent reporting indicates that Burnham had signalled openness to increasing the current £12,570 threshold, but subsequent reports suggested he backed away from committing to a specific £18,000 figure.

In other words, the political debate is real, but the precise policy remains a separate question.

The final decision would depend on the government’s wider fiscal position and, ultimately, its Budget decisions.

That means taxpayers should be cautious about assuming that an £18,000 allowance is guaranteed.

What could happen next?

The coming months will be crucial.

The government’s Autumn Budget is expected to provide a clearer picture of its tax strategy.

Burnham and Chancellor John Healey face the difficult task of balancing competing priorities: supporting households, maintaining public services, controlling borrowing and convincing financial markets that Britain’s public finances remain sustainable.

A large increase in the personal allowance would be an attractive way to deliver a visible tax cut.

But it would also reduce government revenues.

The government would therefore have to decide whether to accept lower revenue, raise money elsewhere or rely on stronger economic growth to compensate.

That is the central economic calculation.

A tax cut with a powerful political message

There is no doubt why the £18,000 figure has become politically attractive.

It is simple.

It is easy to explain.

And it would potentially provide a meaningful benefit to millions of taxpayers.

At a time when many households feel squeezed by the cost of living, a higher tax-free allowance could be presented as a direct way of helping people keep more of what they earn.

But the simplicity of the headline should not hide the complexity underneath.

Someone ultimately has to absorb the cost.

It could be the Treasury through lower revenues.

It could be other taxpayers through higher taxes.

It could be public services through spending reductions.

Or it could be future taxpayers through additional borrowing.

There is no such thing as a completely free tax cut.

Conclusion

Andy Burnham’s call for a higher personal tax allowance has reached a politically important threshold because the difference between £12,570 and £18,000 is large enough to be felt by ordinary households.

The current allowance remains £12,570 for the 2026/27 tax year, with the government’s existing plans keeping it frozen for years to come.

That freeze has intensified concerns about fiscal drag and whether workers are gradually being pulled into a larger tax burden simply because their wages rise.

An £18,000 allowance could offer substantial relief, particularly to lower and middle earners.

It could also strengthen incentives to work and provide households with more disposable income.

But the policy would come with a significant fiscal cost, and Burnham cannot avoid the fundamental question of how that cost would be funded.

For now, the £18,000 figure should be viewed as a major proposal in the political debate rather than a guaranteed change in the tax system.

The real test will come when the government has to turn the promise of putting more money into people’s pockets into an actual Budget decision.

If Burnham chooses to raise the allowance dramatically, millions could benefit.

But taxpayers will also be watching the other side of the ledger.

Because ultimately, the question is not simply how much income should be tax-free?

It is also how much money does the government need, and where will it come from?

That is the difficult choice sitting behind the £18,000 headline.