Andy Burnham has issued an update for households earning just over £12,570, confirming that there is currently no commitment to change the income tax personal allowance. The Prime Minister said the threshold would still be examined as part of the upcoming October Budget, but stressed he would not make any unfunded promises.
The personal allowance is the amount of income a person can earn before they have to pay income tax. It currently stands at £12,570, a figure that has been frozen since 2021. This has meant that as wages and pensions have risen with inflation, more people have been dragged into paying tax, effectively increasing their tax burden without any change in the official rate.
No Unfunded Promises
Burnham had previously suggested he would consider raising the threshold, which would allow lower earners to keep more of their income. However, speaking on the issue, he rowed back on that enthusiasm, saying there was 'no commitment, no unfunded promise.'
He said: "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. 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."
Frozen Threshold and Inflation
The decision to freeze the personal allowance dates back to 2021, when it was set at £12,570. Since then, inflation has pushed wages and pensions higher, meaning that more people now earn above the threshold and are liable for income tax. According to a study, if the allowance had risen in line with inflation over the past few years, it would now stand at around £16,000.
Analysis suggests that raising the threshold to £16,000 would provide a significant tax break for lower earners. Someone earning £16,000 a year would see their taxable income reduced to zero, while those earning more would also benefit from a lower overall tax bill. However, the move would also reduce government revenue significantly, which is why Burnham is cautious.
Implications for Households
For households earning just over £12,570, the October Budget will be a critical moment. If the threshold is raised, many low-income families and pensioners would see an immediate increase in their take-home pay. If it remains frozen, they will continue paying tax on earnings above the current allowance, even though that amount may represent only a small fraction of their total income.
Burnham's comments suggest that any change would have to be funded and would be considered alongside other priorities in the Budget. He emphasized that he wanted to maintain trust in politics by being honest about what is possible, avoiding the kind of unfunded commitments that often dominate political debate.
Budget Considerations
The October Budget is expected to be a major test for the Burnham government, as it balances competing demands for public spending against the need to control borrowing. Tax cuts, such as raising the personal allowance, are politically popular but costly. The Prime Minister's cautious approach indicates that while the issue is on the table, households should not expect an announcement until the full financial picture is clear.
In the meantime, households earning just over £12,570 will have to wait. The Prime Minister has made it clear that no commitment exists today, but the door has not been closed. As Burnham put it, there is 'no commitment at this point to change,' but the Budget will look at it.
