Prime Minister Andy Burnham has signalled a potential financial boost for households earning over £12,570, as he pledged to review the personal allowance income tax threshold at the upcoming Budget. However, he stressed that no firm commitments have been made.
Burnham's Stance on Personal Allowance
Speaking this week, Burnham acknowledged that the frozen threshold has been a major issue raised by voters on the doorstep. The personal allowance—the amount of income you can earn before paying tax—has remained at £12,570 since 2021, despite rising inflation.
The Office for Budget Responsibility (OBR) has calculated that if the threshold had risen in line with inflation, it would now stand at over £16,000. This suggests that low earners have been unfairly dragged into paying income tax as their wages increased.
No Unfunded Promises
Burnham appeared to row back slightly on earlier suggestions that he was ready to raise the threshold. He told reporters: "I want to answer questions honestly in this job, as I said before. I think that’s all about trust in politics and doing politics differently, and I’m determined to keep working in that way."
He added: "It was raised a lot, but I then went on to say, ‘but we’ll have to look at it at the budget alongside everything else.’ So no commitment, no unfunded promise. There is no commitment at this point to change, but we will look at that at the Budget."
Impact on Low-Income Households
Raising the personal allowance would allow more low-income families to keep more of their earnings by not having to pay tax. Currently, anyone earning over £12,570 pays 20% income tax on earnings above that threshold. An increase to £16,000 would save a basic-rate taxpayer up to £686 per year.
The Prime Minister's promise to "look at it at the Budget alongside everything else" leaves the door open for a potential announcement in the autumn fiscal event. However, with no commitment yet, households should not expect immediate changes.
Political Context
Burnham became Prime Minister after winning the Labour leadership and a general election earlier this year. His government has pledged to address the cost-of-living crisis and restore trust in politics. The personal allowance freeze has been a key criticism of the previous Conservative government, which kept thresholds static to raise revenue.
Any change to the personal allowance would require legislation and could be funded by other tax rises or spending cuts. Burnham's cautious language suggests he is balancing the desire to help low earners with the need for fiscal responsibility.
