Chancellor Rachel Reeves and the Treasury have broken their silence over calls to raise the personal tax-free allowance to £18,000. The Labour Party Chancellor's department has now replied to the proposal, which was backed by thousands in a petition.
The petition urged the government: "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. 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."
On Tuesday, the government responded to the petition and ruled out any incoming changes. HM Treasury stated: "The Government is committed to keeping taxes for working people as low as possible while investing in public services and not taking risks with the economy."
The Treasury explained that the previous government froze the main income tax thresholds from 2021/22 until 2027/28, meaning the Personal Tax allowance was not due to rise until April 2028 at the earliest. To ensure the government can deliver on public priorities, the Budget 2025 extended this freeze for a further three years to the end of this decade.
The government currently has no plans to increase the Personal Allowance to £18,000. Increasing it would come at a significant fiscal cost of over £40 billion per year, which would benefit higher earners more than basic-rate taxpayers on average. This would reduce tax receipts substantially, decreasing funds available for hospitals, schools, and other essential public services. A £40 billion cut in public services is equivalent to slashing roughly a fifth of the NHS Budget in England, or around two-thirds of defence spending.
The Treasury added: "The income tax system is highly progressive, with different rates of tax sitting above an internationally high Personal Allowance. The Government is making these fair and necessary choices on tax so it can deliver on the public's priorities. Alongside this, the Government is keeping the contribution as low as possible by pursuing a programme of reform to fix longstanding issues in the tax system."
To support the lowest paid workers, the government has asked the Low Pay Commission to account for the cost of living when making recommendations on minimum wage rates. The government is also supporting families through the universal offer of 15 hours of government-funded childcare for all parents of 3- and 4-year-olds and eligible working parents of children aged 9 months and above can access 30 hours a week in free childcare.
At Budget 2025, the government announced a package of measures to bear down on prices and help ease cost of living pressures for working people, targeting everyday expenses. This includes cutting energy bills and freezing rail fares and NHS prescription fees. The Government keeps all taxes under review as part of the policy making process.
