A petition calling for the personal tax allowance to rise from £12,570 to £20,000 will be debated by MPs in Parliament on Monday, May 12, before the UK Government responds
An online petition urging for the personal tax allowance to be increased from £12,570 to £20,000, in order to assist low-income individuals “get off benefits and allow pensioners a decent income”, has garnered over 248,400 signatures across the UK. This has led to it being scheduled for debate in Parliament next week.
However, a recent update from the UK Government regarding the potential impact of raising the Personal Allowance to £20,000 seems set to quash any expectations of an early lift on the income threshold freeze, which is currently planned to rise with inflation in April 2028, reports the Daily Record.
In a written response to Labour MP Tanmanjeet Singh Dhesi, Treasury Minister James Murray stated that the UK Government “has no plans to increase the Personal Allowance to £20,000”.
Mr Murray said: “The Government is committed to keeping taxes for working people as low as possible while ensuring fiscal responsibility and so, at our first Budget, we decided not to extend the freeze on personal tax thresholds. The Government has no plans to increase the Personal Allowance to £20,000.”
He further explained that raising the Personal Allowance to £20,000 would “come at a significant fiscal cost of many billions of pounds per annum”. He added that this would “reduce tax receipts substantially, decreasing funds available for the UK’s hospitals, schools, and other essential public services that we all rely on”.
The Treasury Minister has emphasised the importance of fiscal prudence, stating: “It would also undermine the work the Chancellor has done to restore fiscal responsibility and economic stability, which are critical to getting our economy growing and keeping taxes, inflation, and mortgages as low as possible.”
Furthermore, the Minister noted the ongoing review of taxes, adding: “The Government keeps all taxes under review as part of the policy making process. The Chancellor will announce any changes to the tax system at fiscal events in the usual way.”
A debate scheduled for Monday, May 12 in Westminster Hall will provide MPs with an opportunity to advocate for their constituents regarding a rise in the Personal Allowance. A Treasury Minister is set to address the arguments presented, explaining the UK Government’s stance on upholding the current freeze until the end of the 2027/28 financial year.
In an online petition, Alan David Frost has called for an increase in the Personal Allowance threshold, labelling it “abhorrent to tax pensioners on their State Pension when it is over the personal allowance” and suggesting that such a move would boost the economy.
The petition, which proposes raising the income tax personal allowance from £12,570 to £20,000, asserts: “We think this would help low earners to get off benefits and allow pensioners a decent income.”
It further argues: “We think it is abhorrent to tax pensioners on their State Pension when it is over the personal allowance. We also think raising the personal allowance would lift many low earners out of benefits and inject more cash into the economy creating growth.”
Responding to the points raised in a petition on February 20, the Treasury echoed Mr Murray’s sentiments. The Department stated: “The Government is committed to keeping taxes for working people as low as possible while ensuring fiscal responsibility and so, at our first Budget, we decided not to extend the freeze on personal tax thresholds.”
Moreover, it has been made clear that there are no current plans from the UK Government to raise the Personal Allowance to £20,000. Full details of this response can be found on the petitions-parliament website. State Pension amounts increased on April 7, but beneficiaries will not notice an immediate bump, as this benefit is paid retrospectively.
Full New State Pension
- Weekly payment: £230.25
- Four-weekly payment: £921
- Annual amount: £11,973
Full Basic State Pension
- Weekly payment: £176.45
- Four-weekly payment: £705.80
- Annual amount: £9,175
To check your own future State Pension payments, use the online forecasting tool on GOV.UK here. Key information to note is that those receiving the full New State Pension will not have income tax to pay. However, pensioners with additional income streams—whether from a job or other pension schemes—may need to contribute tax.
Typically, tax is deducted automatically via the PAYE system for employed individuals and directly from private pensions. Individuals who do not have their tax collected automatically will receive a tax bill from HMRC the subsequent summer, which must be settled by January of the following year.
There’s been a lot of conjecture about how many pensioners will be taxed before the Personal Allowance freeze concludes. However, out of the 13 million State Pensioners in the UK, approximately 8.51 million (65%) are already subject to some form of tax in retirement, so this isn’t a new phenomenon.
With the 13th year of auto-enrolment in workplaces underway, more individuals are set to enjoy an increased income during their retirement and are likely to pay tax, typically deducted from their private pension.
It’s crucial to note that any tax due in retirement is calculated on the amount of income earned above the threshold, not the total additional income. For instance, if someone has a total annual income of £13,000, they’ll be taxed on £430 – the sum exceeding the £12,570 threshold. Those impacted would then owe HMRC 19% of their income above the threshold, which is the starter rate of tax in Scotland (20% in England).
