Everything just keeps getting more and more and more expensive. At least, that’s certainly how it seems! As the cost of living crisis continues to impact millions of people across the country, people are looking for creative solutions to improve their finances. One particular route is a recent petition, which has floated the idea of increasing the Income Tax Personal Allowance.
The petition, which at the time of writing counts 63,771 signatures, suggests that the personal allowance could be raised from £12,570 to £20,000. It suggests that “[this] would help with increasing rent, mortgages, Council tax, and Gas and Electric bills. Some families can’t afford to go back to work after children due to childcare costs wiping their whole income!”
Okay, but what is the Income Tax Personal Allowance?
At its simplest, the Personal Allowance is the amount of money that you earn that you do not need to pay tax on. Assuming you earn less than £100,000 annually, the first £12,570 you earn is income that you do not need to pay tax on.
There are a few exceptions to this allowance, such as the Blind Person’s Allowance. This allows blind people to earn more before they start paying Income Tax. Also, if you earn over £100,000, your Personal Allowance decreases based on how much you earn over the £100,000 mark.
The Personal Allowance has been frozen at £12,570 since 2021.
HMRC’s response
Due to the interest the petition has garnered,HMRC said the following:
“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 Government currently has no plans to increase the Personal Allowance to £20,000. Increasing the Personal Allowance to £20,000 would come at a significant fiscal cost of more than £50 billion per annum. 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. A £50 billion cut in public services is equivalent to slashing roughly a quarter of the NHS Budget, or around 80% of defence spending.
To support the lowest paid workers in our economy, the Government asked the Low Pay Commission to account for the cost of living when making their recommendations on the minimum wage rates to apply from April 2025, for the first time. 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.
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 the Budget on the 26th November in the usual way.”
If the petition reaches 100,000 signatures, it will be considered for debate in Parliament. See the petition here.