Prime Minister Andy Burnham faces mounting pressure to release the personal allowance from its frozen state. The current freeze at £12,570 since 2021 has resulted in more individuals being pushed into tax liability as their incomes rise.
The personal allowance freeze is expected to persist until at least 2031, despite public frustration. Andy Burnham hinted at a potential review later this year within the Budget, which is yet to be scheduled by Chancellor John Healey.
If the personal allowance had kept pace with inflation, it would have reached approximately £16,072 for the 2026-27 tax year and £17,380 by 2029-30, according to AJ Bell’s analysis. This freeze is already costing taxpayers around £700 annually, with a basic rate taxpayer potentially losing £960 by 2030/31, depending on wage and inflation variations.
Charlene Young, a senior expert at AJ Bell, expressed doubt that even if the freeze is lifted, the personal allowance will be fully restored in real terms. She emphasized that without significant increases and inflation adjustments, taxpayers might face continued financial strain.
AJ Bell suggested that a £500 raise in the personal allowance could save basic rate taxpayers £100 each year. However, this adjustment would come at a significant cost, estimated at around £5 billion for a £500 increase, as per HMRC calculations.
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