Income Tax Personal Allowance Petition – The Current Situation
- Adil Akhtar
- Jun 25
- 11 min read
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Income Tax Personal Allowance Petition – The Current Situation
The Personal Allowance Petition – What’s Happening in 2025?
What’s the Latest on the Income Tax Personal Allowance Petition?
Right, let’s cut to the chase: as of June 2025, the petition to raise the UK income tax personal allowance from £12,570 to £20,000 has garnered over 270,346 signatures, triggering a parliamentary debate on 12 May 2025. Started by Alan Frost, a retired pensioner, it’s one of the most popular petitions this Parliament, reflecting widespread frustration with the current tax system. The government, however, has rejected the proposal, citing a £50 billion cost that would strain public services. Instead, they’ve stuck to their plan to keep the allowance frozen until April 2028, when it will rise with inflation. So, no immediate change, but the debate’s far from over.
What Is the Personal Allowance, and Why Does It Matter?
Now, if you’re wondering what the personal allowance is, it’s the amount of income you can earn each tax year (6 April to 5 April) before paying income tax. For 2025/26, it’s £12,570, unchanged since 2021/22. This freeze, first set by then-Chancellor Rishi Sunak and extended by Jeremy Hunt, means more people are paying tax as wages and pensions rise with inflation. The petition argues that bumping it to £20,000 would give low earners and pensioners more breathing room, especially during the cost-of-living crisis. It’s a big deal because it directly affects your take-home pay or pension.
How Do UK Tax Bands Work in 2025/26?
Let’s break down the tax bands to see where you stand. For 2025/26, if you live in England, Wales, or Northern Ireland, here’s how your income is taxed after the personal allowance:
Income Band | Tax Rate | Taxable Income Range |
Personal Allowance | 0% | £0 – £12,570 |
Basic Rate | 20% | £12,571 – £50,270 |
Higher Rate | 40% | £50,271 – £125,140 |
Additional Rate | 45% | Over £125,140 |
Note: The personal allowance tapers by £1 for every £2 earned over £100,000, vanishing entirely at £125,140. Scotland has different rates, starting at 19% for £12,571–£14,876. National Insurance (NI) kicks in at £242/week for employees, with an 8% rate up to £967/week. These figures, confirmed via GOV.UK, shape how much tax you owe.
Who Started This Petition, and What’s Driving It?
Picture this: Alan Frost, a pensioner from Bridgwater, retires after decades of work only to find his state pension nibbling at his tax-free allowance. Frustrated, he launches the petition in February 2025, arguing it’s “abhorrent” to tax pensioners’ state pensions when they exceed £12,570. His goal? Lift low earners off benefits and give pensioners a “decent income.” With 270,346 signatures by June, it’s struck a chord. Frost watched the 12 May debate from the public gallery, where MPs like Lewis Atkinson and Treasury Secretary James Murray clashed over its feasibility. The petition’s popularity reflects anger over falling disposable incomes, down from 2019/20 to 2023/24.
Why Are Pensioners So Concerned About the Personal Allowance?
Here’s the rub for pensioners: the full new state pension for 2025/26 is £11,962.80 annually, just £607.20 shy of the £12,570 allowance. Add a small private pension or part-time work, and you’re suddenly paying 20% tax. The petition highlights this “double whammy,” especially after the government means-tested Winter Fuel Payments. While the triple lock ensures a 4.1% pension rise (£470 more for full new state pensioners), it pushes more pensioners closer to the tax threshold. In 2024/25, 8.51 million of 13 million pensioners paid some tax, up from 6.74 million in 2021/22. Frost’s petition wants to stop this creep.
What Did the Government Say About the Petition?
Now, don’t hold your breath for a quick fix. The government’s response, echoed by James Murray in May 2025, is clear: raising the allowance to £20,000 would cost £50 billion, gutting hospitals and schools. They claim the UK’s £12,570 allowance is the “most generous in the G7” and point to other support, like the £12.21/hour National Living Wage and triple lock pensions. They also ended speculation about extending the freeze beyond 2028, meaning relief might come then. But critics, including Frost, argue this ignores the squeeze on low earners and pensioners now.
Are There Other Petitions Out There?
Funny enough, Frost’s isn’t the only voice calling for change. Another petition, with 47,717 signatures, pushes for a £45,000 allowance, arguing the current threshold widens the rich-poor gap. A third, with 527 signatures, wants a £25,000 allowance for pensioners only. These show a spectrum of demands, but none have Frost’s traction. The £45,000 idea was dismissed for its “tens of billions” cost, while the pensioner-specific one hasn’t hit the 10,000-signature mark for a government response. Frost’s petition remains the focal point.
Why Hasn’t the Allowance Changed Since 2021?
So, why the stubborn freeze? Back in 2021, Rishi Sunak froze the allowance to bolster public finances post-COVID. Jeremy Hunt stretched it to 2028, and Labour’s Chancellor Rachel Reeves confirmed it in her 2024 Autumn Budget. This “fiscal drag” pulls more people into tax as incomes rise with inflation. By 2025/26, 1.3 million more taxpayers and a million extra higher-rate payers are expected, raising £1.2 billion annually. The government says it’s about stability, but petitioners like Frost see it as unfair, especially when real wages are flat.
Fiscal Drag and Real-World Impacts – Are You Paying Too Much?
What Exactly Is Fiscal Drag, and Why Is It Hurt Your Wallet?
Now, you’ve probably heard the term “fiscal drag” thrown around, but let’s make it simple. Imagine your wages go up with inflation, say 4%, but the personal allowance (£12,570) and tax bands (£12,571–£50,270 for basic rate) stay frozen. You’re not richer in real terms, but more of your income gets taxed because you’re nudged into a higher tax bracket. That’s fiscal drag, and it’s a sneaky way the government boosts revenue without raising tax rates. By 2028, when the freeze ends, the Institute for Fiscal Studies estimates 3 million more UK taxpayers will be dragged into paying tax, with 2.5 million extra in the higher-rate band. For 2025/26, this means less take-home pay for many, especially pensioners and low earners.
How Does Fiscal Drag Affect Pensioners in 2025?
Here’s a kicker for pensioners: the state pension’s triple lock ensures it rises by the highest of inflation, wages, or 2.5%. For 2025/26, the full new state pension is £11,962.80, up 4.1% (£470) from 2024/25. Sounds great, right? But with the personal allowance stuck at £12,570, any extra income—like a private pension or savings interest—pushes you closer to paying tax. Take Doreen Hadleigh, a hypothetical 68-year-old from Swindon. Her state pension (£11,962.80) plus a £2,000 private pension gives her £13,962.80. She pays 20% tax on £1,392.80 (£13,962.80 minus £12,570), losing £278.56 annually. If the allowance were £20,000, she’d owe nothing. By 2028, 400,000 more pensioners will pay tax, per HMRC projections.
What’s the Tax Difference If the Allowance Were £20,000?
Let’s crunch some numbers to see why the petition’s £20,000 allowance idea is so appealing. Below is a table comparing tax liabilities for different incomes under the current £12,570 allowance versus the proposed £20,000 for 2025/26 (England, Wales, Northern Ireland rates):
Annual Income | Tax with £12,570 Allowance | Tax with £20,000 Allowance | Savings |
£15,000 | £486 (20% on £2,430) | £0 | £486 |
£25,000 | £2,486 (20% on £12,430) | £1,000 (20% on £5,000) | £1,486 |
£50,000 | £7,486 (20% on £37,430) | £6,000 (20% on £30,000) | £1,486 |
£100,000 | £27,486 (40% band kicks in) | £26,000 (40% band kicks in) | £1,486 |
Source: Calculated using 2025/26 tax rates from GOV.UK. Note: The savings cap at £1,486 because higher earners lose the allowance taper above £100,000. This table shows low and middle earners benefit most from a higher allowance, aligning with the petition’s goal to ease the squeeze on them.
How Does Fiscal Drag Hit Self-Employed Business Owners?
Now, consider this: if you’re self-employed, fiscal drag stings differently. Take Idris Llewellyn, a 42-year-old graphic designer from Cardiff earning £30,000 in 2025/26. After his £12,570 allowance, he pays 20% tax on £17,430 (£3,486) plus Class 4 National Insurance at 6% on profits above £12,570 (£1,055.40). If his income rises 4% to £31,200 in 2026/27, his taxable income grows to £18,630, bumping his tax to £3,726 and NI to £1,127.40—a £312 increase despite no real gain in purchasing power. A £20,000 allowance would save Idris £1,486 in tax, letting him reinvest in his business. The freeze, confirmed in the 2024 Autumn Budget, hits small business owners hard as costs like energy and supplies also rise.
Are You Overpaying Tax Because of an Incorrect Tax Code?
Be careful! A wrong tax code can make fiscal drag worse. Your tax code (usually 1257L for £12,570 allowance) tells employers how much tax to deduct via PAYE. HMRC data shows 1 in 5 UK workers had incorrect codes in 2023/24, costing £1.2 billion in overpaid tax. For example, Bronwen Tewkesbury, a 35-year-old nurse from Leeds, was on a 1185L code in 2024/25, giving her only £11,850 allowance. She overpaid £144 in tax before noticing. Common culprits? Multiple jobs, pension withdrawals, or HMRC errors. Checking your code now can save you hundreds in 2025/26.
How Can You Check Your Tax Code and Claim a Refund?
So, the question is: how do you make sure you’re not overpaying? Here’s a step-by-step guide to verify your tax code with HMRC, perfect for employees, pensioners, or the self-employed:
Step-by-Step Guide: Checking Your Tax Code
Log into Your Personal Tax Account: Visit GOV.UK and sign in (or create an account with your National Insurance number).
Find Your Tax Code: Under “Income Tax,” click “Current tax year” to see your code (e.g., 1257L). It’s also on payslips or P60s.
Check It’s Correct: For 2025/26, 1257L means £12,570 allowance. Codes like BR (basic rate, no allowance) or 1185L (lower allowance) may signal errors.
Contact HMRC If Wrong: Call 0300 200 3300 or use the online “Income Tax: general enquiries” form. Have your NI number and payslips ready.
Claim a Refund: If you’ve overpaid, HMRC adjusts your code or issues a refund. For 2024/25 overpayments, claim via your Personal Tax Account or form P50 if you’ve stopped working.
Monitor Annually: Check yearly, especially if you change jobs, retire, or start a pension.
This guide, based on HMRC’s 2025 process, takes 15–30 minutes and can unlock refunds. In 2023/24, 2.1 million taxpayers reclaimed £750 million, per HMRC.
What Can You Do to Plan for Fiscal Drag in 2025/26?
None of us love tax planning, but it’s worth a look. Here are practical tips to soften fiscal drag’s blow:
Boost Pension Contributions: Payments reduce taxable income. For £25,000 earners, £1,000 into a pension saves £200 tax (20%) plus NI if via salary sacrifice.
Use Tax-Free Savings: ISAs (up to £20,000/year) keep interest tax-free. With rates at 4–5% in 2025, this shields savings from the 20% tax hit.
Check Marriage Allowance: If one spouse earns below £12,570, transfer £1,260 of their allowance to the other (basic-rate taxpayer), saving £252.
Self-Employed? Claim Expenses: Deduct costs like equipment or travel to lower taxable profits. Idris, our designer, claims £2,000 in expenses, saving £400 tax.
These steps, verified via GOV.UK, work for 2025/26 and counter fiscal drag’s creep.
Are There Other Ways to Push for a Higher Allowance?
Now, it shouldn’t surprise you that the petition isn’t the only way to influence policy. You can:
Sign or Share Petitions: Boost Frost’s petition or others (£45,000, £25,000) at petition.parliament.uk.
Write to Your MP: Find them via parliament.uk and voice your tax concerns. MPs raised fiscal drag in the 12 May 2025 debate after constituent letters.
Join Advocacy Groups: Organisations like Age UK or the Federation of Small Businesses lobby for tax fairness, amplifying your voice.
While the government’s firm on the £12,570 allowance, public pressure could shape future budgets, especially post-2028.
What Happens If the Allowance Stays Frozen Until 2028?
Here’s a sobering thought: by 2028, fiscal drag will hit harder. If inflation averages 2.5% annually, a £25,000 income in 2025/26 will feel like £23,200 in 2028 purchasing power, yet tax liability rises. The Resolution Foundation predicts 7 million more taxpayers by 2028, with £40 billion extra revenue for HMRC. For pensioners, the state pension could hit £13,000 by 2028, eating most of the allowance. A £20,000 allowance would ease this, but without it, planning now—via pensions, ISAs, or refunds—is critical.
Summary of Key Points
Now, let’s wrap things up with the essentials you need to know about the income tax personal allowance petition and its implications for UK taxpayers in 2025. Below are the most critical points, distilled into clear, actionable takeaways based on everything we’ve covered. Each point is a single sentence for clarity, limited to 10 to keep it focused.
The petition to raise the UK personal allowance from £12,570 to £20,000, started by Alan Frost, has over 270,346 signatures and sparked a parliamentary debate on 12 May 2025, but the government rejected it due to a £50 billion cost.
The personal allowance, frozen at £12,570 since 2021/22, determines how much income you earn tax-free, and its freeze until 2028 pushes more people into paying tax as incomes rise.
Fiscal drag occurs when frozen tax thresholds like the £12,570 allowance pull more of your income into higher tax bands, reducing take-home pay despite no real wealth gain.
Pensioners are hit hard, as the 2025/26 state pension (£11,962.80) nears the allowance, meaning small additional incomes trigger 20% tax, affecting 8.51 million pensioners in 2024/25.
A £20,000 allowance would save low earners (e.g., £15,000 income) £486 in tax and middle earners (e.g., £50,000) £1,486, but higher earners see less benefit due to the allowance taper above £100,000.
Self-employed business owners face rising tax and National Insurance burdens from fiscal drag, making expense claims and pension contributions key to reducing taxable income.
Incorrect tax codes, affecting 1 in 5 workers in 2023/24, can lead to overpaying tax, so checking your code (e.g., 1257L for £12,570 allowance) via HMRC’s Personal Tax Account is crucial.
Practical steps like boosting pension contributions, using ISAs, or claiming Marriage Allowance can offset fiscal drag’s impact, saving hundreds in 2025/26.
Alternative petitions, like one for a £45,000 allowance (47,717 signatures), exist but lack traction, showing varied public demands for tax reform.
By 2028, fiscal drag will add 3 million taxpayers and raise £40 billion for HMRC, underscoring the need to plan finances now through refunds, savings, or policy advocacy.
About The Author:
Adil Akhtar, ACMA, CGMA, CEO and Chief Accountant of Pro Tax Accountant, is an esteemed tax blog writer with over 10 years of expertise in navigating complex tax matters. For more than three years, his insightful blogs have empowered UK taxpayers with clear, actionable advice. Leading Advantax Accountants as well, Adil blends technical prowess with a passion for demystifying finance, cementing his reputation as a trusted authority in tax education.
Email: adilacma@icloud.com
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