Andy Burnham is reportedly considering raising the £12,570 personal tax allowance in a major boost for low-income households and pensioners. The former Greater Manchester Mayor entered Number 10 on Monday, July 20 and has pledged to help households with the cost of living.
What is the Personal Allowance?
The personal allowance is the amount of money someone can earn before they have to pay income tax. The rate has stayed frozen since 2021, dragging more low earners into paying tax every year as their incomes increase. This includes low-income pensioners who, as it stands, only require a small private pension to go over the tax-free limit. Raising the threshold would give more low-income households breathing space and allow them to earn more before having to pay tax.
Impact of Frozen Tax Bands
Keeping tax bands frozen has proved controversial in recent years. The Conservatives originally froze them before Labour's Rachel Reeves extended the freeze. Burnham has also refused to rule out bringing back the 50p top rate of tax.
Burnham's Comments
The new PM told reporters: "All of this will be looked at though at the Budget, and obviously it's difficult given the financial circumstances in which we find ourselves. But I wanted to recognise the point because it's challenging for people and it's people on the lowest incomes perhaps who've most been affected by that. So it's an issue that I'm just kind of showing I have a visibility of the issue and the impact it's had on the different groups that I've mentioned, but it's difficult because changing the threshold is not without significant consequences. But I'm looking at it."
Potential Benefits
Raising the personal allowance would provide a major boost to low-income households and pensioners, allowing them to earn more before being subject to income tax. This measure is part of Burnham's broader commitment to addressing the cost of living crisis.
