A campaign calling for a rise in the income tax threshold has almost reached a major milestone, heaping pressure on Chancellor Rachel Reeves to revise the personal tax allowance for Britain’s lowest-paid workers in the spring statement next Tuesday (March 3).

Concern is growing that millions of extra individuals, including many amongst the nation’s poorest earners, have been caught by the tax system through ‘fiscal drag’. This occurs because the basic income tax threshold has been frozen at £12,570 since 2021, while inflation, which impacts wages, has been climbing steeply.

As a result, some of Britain’s most vulnerable employees face taxation as soon as their income surpasses that amount – and because it has stayed static, inflation and wage growth mean that millions more are subject to tax than would have been if it had increased in line with tradition.

A petition on the Parliament website urging the Government to increase this threshold has attracted 88,716 signatures, meaning the Treasury must now issue a response. If it reaches 100,000 signatures, a Parliamentary debate could be prompted, amplifying pressure on Ms Reeves to introduce changes in the November Budget.

However, supporters must act quickly to reach the threshold – just 3 days remain before it closes on February 28. The petition, initiated by Shannon Keene, states: “Raise the income tax personal allowance from £12,570 to £20,000. This would help with increasing rent, mortgages, Council tax, and Gas and Electric bills. Some families can’t afford to go back to work after children due to childcare costs wiping out their whole income!

“We think that we are currently paying ridiculous amounts of tax, and that minimum wage isn’t even enough to support an average family. We believe that this would lead to a massive increase in people willing to look for work, instead of people not wanting to, due to it being too expensive to live now.”

The matter has sparked multiple petitions, demonstrating the strength of public sentiment nationwide. Earlier this year, one petition demanding the threshold be lifted to £20,000 gathered an impressive 281,792 signatures on the Parliament website before closing to additional signatories over the summer.

This triggered a Parliamentary debate in which the Treasury calculated the cost at £50 billion. Reflecting the scale of public concern, a fresh petition has since been launched urging the income tax personal allowance to be raised from £12,570 to £20,000.

The previous petition’s status as one of the largest ever recorded on the parliamentary website was seen by campaigners as a clear indicator of strong public feeling on the matter. Currently, a basic tax rate of 20 per cent applies to earnings above £12,570, whilst higher earners are subject to a 40 per cent rate on income exceeding £50,270 – both thresholds have remained frozen since 2021.

At the heart of the row is ‘fiscal drag’, a phenomenon caused by the personal income tax allowance being pegged at £12,570 since 2021. During a Westminster Hall debate in the Commons earlier this year, Liberal Democrat Daisy Cooper pointed to the overwhelming public backing as a reflection of the national mood: “The number of people who have signed it speaks to the strength of public feeling about this issue, which is a serious policy challenge for all political parties. Indeed, I think the petition does more than show the strength of feeling that exists.

“I regard it as a cry for help, because right around the country there are struggling families gripped by a cost-of-living crisis. We have a toxic combination that means that people are seeing their taxes go up but not seeing services improve. It is leading to that cry for help.”

James Murray, Exchequer Secretary to the Treasury, has warned that raising the tax threshold to £20,000 would create a significant financial strain. He said: “I recognise the views of everyone who has put their name to the petition, and let me be clear that, as a Government, we want taxes on working people and on pensioners, who have worked hard all their lives, to be as low as possible.

“We were elected to put more money in people’s pockets and, crucially, we were elected to do so in a fiscally responsible way. That is a critical point to understand.”

Andrew Prosser, head of investments at InvestEngine, said: “While the upcoming spring statement might not bring with it sweeping financial reforms, the tone and outlook could still shape consumer and business confidence for the rest of the year.

“Last year’s spring statement saw the Chancellor take the opportunity to make major spending announcements.

“Notably we had signals of plans for ISA reform, which paved the way for the cut to the cash ISA allowance announced later that year – all part of a broader push to improve the country’s investment culture.

“It shows that, despite wanting to move to one major fiscal event each year, the Chancellor has repeatedly been drawn into making fiscal announcements at other points in the year too.

“And ahead of this year’s statement, there are several personal and business finance issues Rachel Reeves should be looking to address and clarify to boost confidence in the government’s plans – first and foremost: the ‘tax trap’.

“Despite wanting to boost the UK’s investment culture, the government crucially chose to extend the freeze on income tax thresholds until 2031, leaving people worse off and with less money to put aside.

“As wages rise, fiscal drag means more people are being pulled into higher rates.

“The latest government figures project over seven million people will pay the higher rate of tax in 2025/26, a near 39 per cent increase on 2022/23.”

To view and support the petition, click here.

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