Petition Urges HMRC to Raise Personal Tax Allowance to £18,000
A petition on the official Parliamentary website is calling on the Labour Party government to significantly increase the tax-free Personal Allowance to £18,000. This move aims to counteract the effects of fiscal drag and provide relief to lower-income earners.
Background of the Personal Allowance Freeze
In the Spring 2021 Budget, then Chancellor Rishi Sunak, a Conservative MP, announced that the personal allowance and higher rate threshold would be frozen for the four-year period from 2022/23 to 2025/26. This freeze was initially projected to boost tax receipts by £1.6 billion in 2022/23 and £8.2 billion by 2025/26.
The freeze was confirmed in the Autumn Budget of October 2021, with income tax rates remaining unchanged for 2022/23. Currently, the personal allowance stands at £12,570 for the 2024/25 tax year, having been frozen since 2021.
Petition Details and Demands
The petition states: "Raise the personal tax allowance to £18,000. Since 2021 personal tax allowance has been frozen at £12,570. This freeze was due to expire this year but the Chancellor of the Exchequer has extended it to 2031."
It further argues: "We want to keep some more of our own money. If you are earning minimum wage then you may soon be paying tax because of fiscal drag. Some higher earners pay little or no tax due to clever use of accounting rules. We think this is so wrong."
Current Income Tax Structure
Income tax in the UK is charged at three rates:
- Basic rate: 20%
- Higher rate: 40%
- Additional rate: 45%
For the 2024/25 tax year, the basic rate limit is set at £37,700. Taxable income excludes personal allowances, which represent the amount of money an individual can earn tax-free.
The higher rate threshold, where individuals start paying the 40% rate, is £50,270 for 2024/25. The additional rate of 45% applies to income above the higher rate threshold, which was set at £150,000 in 2022/23.
Petition Impact and Government Response
According to parliamentary rules, if the petition reaches 10,000 signatures, the government is required to respond. At 100,000 signatures, the petition will be considered for debate in Parliament. This mechanism provides a direct channel for public concerns to be addressed at the highest levels of government.
The extension of the personal allowance freeze to 2031 has sparked significant public debate, with critics arguing it disproportionately affects lower and middle-income earners through fiscal drag, where inflation pushes salaries into higher tax brackets without actual increases in real income.
