Andy Burnham has said there is “no commitment at this point” to change the tax-free personal allowance, days after suggesting the frozen threshold was on his mind as Prime Minister.
The allowance – the amount people can earn before paying income tax – has been frozen at £12,570 since 2021 and is due to stay there until 2031.
During a visit to Bath on Wednesday, Burnham sought to play down expectations of change, while defending how his earlier comments on the personal allowance threshold had been reported.
What Burnham said before
Burnham has hinted twice in the last week that cuts to the income tax threshold could be on the table – first in an interview over the weekend, then to journalists on Monday.
Speaking to The Times, Burnham said the “frustration about the personal allowance” he had heard while campaigning in the Makerfield by-election was “lodged in my mind”.
Then, speaking to reporters on Monday, Burnham called the freeze a “growing issue” that would be “looked at” in the Budget, though he cautioned any change would be “difficult given the financial circumstances in which we find ourselves”.
“I think it’s been frozen now for a number of years, so it has dragged more people in,” he added.
Asked whether he would revive the 50p top rate of income tax to help fund it, he twice declined to rule it out. “I think that would be just premature to say that. I’ve barely got my feet under the table,” he said.
Such a move would sit uneasily with Labour’s 2024 manifesto commitment not to raise taxes on “working people”.
Burnham also told his Cabinet at their first meeting on Tuesday that the Government must show “fiscal discipline”.
“We’ve got to show that our commitment to the fiscal rules is real and we’re prepared to make difficult decisions in relation to that,” he added.
The fiscal rules, set by former Chancellor Rachel Reeves after the 2024 election, require day-to-day spending to be balanced by taxation, with debt falling as a share of GDP.
What he is saying now
His wording on the issue had shifted by the time he reached Bath today for a visit.
Burnham implied the reaction to his earlier comments had frustrated him. “It’s funny these days you can’t answer a question honestly without then people reading everything else into it,” he told broadcasters.
“I want to answer questions honestly in this job… 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.”
Asked whether tax rises were likely at the Budget to pay for his cost-of-living measures, he said: “No, we’ll take decisions on tax at the budget.
“This is about reprioritising in this phase… going to the public’s priorities, the cost-of-living crisis, the housing crisis.”
He pointed to his VAT cut on electricity bills and £2 bus fare cap as evidence he was already acting: “I’ve made a number of moves that will deal with some of these challenges.”
Why does the freeze matter?
The personal allowance freeze, in place since 2021, has hit taxpayers through something called fiscal drag.
As wages rise with inflation but the threshold stays fixed, a growing share of income becomes taxable, even though the tax rates themselves haven’t changed.
Pensioners are especially exposed. The state pension is £12,548 a year, within £22 of the frozen threshold, and HMRC figures show over-65s paying income tax have passed 10 million for the first time.
The Office for Budget Responsibility forecasts up to a million more pensioners could be paying tax by 2030-31 as the triple lock pushes the pension past the allowance.
More broadly, frozen thresholds are expected to bring 780,000 people into income tax for the first time, while pushing 920,000 into the higher-rate band and 4,000 into the additional rate.
What would it cost to change it?
The Resolution Foundation has calculated that uprating the personal allowance by inflation over the next three financial years would cost £9.2bn by 2029-30, or £3.7bn for a single-year uplift in 2027-28 alone.
Investing platform AJ Bell has estimated that every £100 added to the allowance costs the Treasury roughly £1bn a year, meaning restoring it to its inflation-adjusted value of around £16,000 could cost about £35bn.
Charlene Young, of AJ Bell, said: “Cutting income tax bills by increasing the tax-free personal allowance is clearly an attractive political pitch, but there is no such thing as a free lunch.”
Burnham would not be the first to step back from an expensive personal allowance pledge.
Reform UK has also backtracked from its own 2024 manifesto pledge to raise the allowance to £20,000, downgrading it to “a goal we should aspire for”.
The Institute for Fiscal Studies had warned that Reform’s pledge could cost up to £80bn a year.
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