The Labor Party government is set to debate a petition calling for a significant increase in the income tax personal allowance—from the current £12,570 to £20,000. The petition, hosted on the Parliamentary website, has amassed over 100,000 signatures, triggering the requirement for a formal debate in Parliament.
The petition lays out its case clearly: “Raise the income tax personal allowance from £12570 to £20000. We think this would help low earners to get off benefits and allow pensioners a decent income.” It continues with a pointed critique of the current system: “We think it is abhorrent to tax pensioners on their state pension when it is over the personal allowance. We also think raising the personal allowance would lift many low earners out of benefits and inject more cash into the economy creating growth..”
Supporters argue that a higher personal allowance would alleviate financial pressure on the most vulnerable, allowing low earners to keep more of their income and reducing reliance on state benefits, while also stimulating economic growth, according to Yahoo.
Under current parliamentary rules, any petition that collects more than 100,000 signatures must be debated. Moreover, the government typically responds to petitions with over 10,000 signatures, signaling widespread public concern over the current tax thresholds. The petition’s success reflects a growing sentiment that the existing personal allowance is both outdated and inequitable, particularly impacting those with lower incomes and pensioners.
Experts have also weighed in on the matter. Victor Bulmer-Thomas of the London School of Economics noted, “The distributional impact of this particular stealth tax may come back to bite the administration that imposed it. The reason is that the impact is much more severe on those on lower incomes than those on higher ones.” His observation highlights the disproportionate burden placed on low-income individuals by the current tax system.
Adding another layer to the debate, Quilter’s Shaun Moore commented, “The tax trap between £100,000 and £125,140 is one of the most punishing thresholds in the system. While it is of course a nice problem to have, this is a problem that can stifle ambition as people look for ways to reduce their workload or turn down higher-paid roles for fear of finding themselves in the trap.” Moore’s remarks underscore the broader implications of current tax policies on personal and professional aspirations.
It is crucial to remember that the amount of Income Tax someone pays depends on how much of their taxable income exceeds their Personal Allowance. The allowance decreases by £1 for every £2 of income above the £100,000 limit and can eventually be reduced to zero. As the debate unfolds, many hope that revising these thresholds will bring a fairer, more supportive tax system that benefits lower earners, pensioners, and the economy as a whole.
