The Labour government has delivered a firm response to a public petition demanding a radical increase to the personal tax-free allowance, definitively ruling out any rise to £20,000.
Fiscal Responsibility Over Tax Cuts
In an official statement published on the Parliamentary petition website, HM Treasury explained its position. The government emphasised its commitment to keeping taxes low for working people while ensuring fiscal responsibility and maintaining investment in public services.
The Treasury stated unequivocally that it currently has no plans to increase the Personal Allowance to £20,000. The primary reason cited was the enormous financial implication, which officials calculated would come at a significant fiscal cost of more than £50 billion per annum.
The Impact on Public Services
The statement outlined the potential consequences of such a costly tax change, warning it would reduce tax receipts substantially. This would decrease the funds available for the UK’s essential services.
To illustrate the scale, the Treasury provided a stark comparison: a £50 billion cut is equivalent to slashing roughly a quarter of the NHS Budget, or around 80% of the entire defence spending.
The petition, which had garnered 32,000 signatures, argued that a £20,000 threshold would help families cope with soaring living costs, including rising rent, mortgages, council tax, and energy bills. It also suggested the change would incentivise people to seek work by making employment more financially viable, especially for those facing high childcare costs.
Alternative Support Measures
While rejecting the tax allowance increase, the government highlighted other measures it is taking to support households. For the lowest paid workers, the government has asked the Low Pay Commission to account for the cost of living in its recommendations for minimum wage rates from April 2025.
Furthermore, support for families is being provided through the expansion of government-funded childcare. This includes 15 hours for all parents of 3- and 4-year-olds, and 30 hours a week for eligible working parents of children aged 9 months and above.
The Treasury concluded by noting that all taxes are kept under review and that any future changes to the tax system will be announced by the Chancellor at the upcoming Budget on the 26th of November.
