MPs intervened as public pressure mounts on Chancellor Rachel Reeves to increase the personal tax allowance from £12,570 to a staggering £45,000. The current threshold, frozen since 2021, has resulted in some of the UK’s lowest earners paying more income tax.

A petition on the Parliament website, which has amassed 43,626 signatures, is challenging what many see as an ‘unjust’ tax hike, often referred to as ‘fiscal drag’ – and got a response from the Government. However an influential committee decided the Treasury response was inadequate and has ordered a new response to answer the questions in a strong rebuke.

Denver Johnson, the petitioner, stated: “The Personal Allowance is the amount of income a person can get before they pay tax. It stands at £12,570 in 2024. We would like the standard Personal Allowance raised to what we think is a more realistic figure of £45,000.”

Since 2021, the income tax threshold has been frozen, dragging millions of low earners into the tax net through ‘fiscal drag’. The basic 20% tax rate kicks in at £12,570, while the higher 40% rate starts at £50,270 – both thresholds have remained unchanged since 2021.

Experts estimate that by the end of the freeze in 2028, this will have raised £1.2 billion for the Treasury. This phenomenon, known as ‘fiscal drag’, results in more individuals being liable for taxation or moving into higher tax bands, with analysts highlighting the particular burden on those with lower incomes.

Source: EXPRESS