Andy Burnham's rowing back on the £12,570 HMRC personal tax-free allowance could cost workers £700. Mr Burnham, the new Labour Party Prime Minister, appeared to peel back on promises to look at income tax rates on Wednesday.
Background on the Personal Allowance Freeze
It came after days of speculation Mr Burnham could raise the £12,750 tax-free allowance. Mr Burnham told The Times the frozen personal allowance was "the thing I heard the most on the doorsteps" in Makerfield, adding it had become "lodged in my mind". According to figures from the Office for Budget Responsibility (OBR), if the allowance had increased in line with inflation it would now stand at £16,070.
Financial Impact on Workers
By the time the freeze is due to end in April 2031, the additional tax paid by a typical basic-rate taxpayer is projected to rise to around £960 a year. A typical basic-rate taxpayer earns between £12,571 and £50,270. This represents a significant financial blow for millions of workers across the country.
Political Reactions and Criticism
In the last two days, the prime minister has been accused of performing U-turns over raising the income tax threshold, raising taxes for higher earners and freezing private sector rents. Sir Mel Stride, from the Tories, also said Chancellor John Healey was "somewhat captive to a prime minister who seems to want to go back to the 1970s and huge spending and state intervention". He accused the Government of pursuing "higher taxes, higher borrowing" and said opposition to welfare reforms among Labour MPs could further limit the Chancellor's options.
Expert Commentary
Guto Harri, who was once the communications director for the former prime minister Boris Johnson, said of Mr Burnham: "He's not an ordinary person any more, he is the first lord of the Treasury and the prime minister of Britain." Guto went on: "So if he says these things, it is reasonable for the people who hear him to think something will follow. And if something doesn't follow, then people are likely to become cynical quite quickly."
