Prime Minister Andy Burnham has stepped back from earlier indications that he might increase the tax-free personal allowance threshold. The current limit of £12,570 has remained static since 2021, a policy that has resulted in a higher number of individuals entering tax brackets as their wages rise.
During a recent weekend interview, Burnham noted that concerns regarding the allowance had been raised with him during the Makerfield by-election. Although he suggested on Monday that the matter would be reviewed in the upcoming budget, he admitted that such a move would be financially challenging given the current state of the economy. Close associates have since clarified that altering the personal allowance is not a current priority in the Prime Minister’s strategy to address the rising cost of living.
Burnham continues to uphold Labour’s 2024 election pledge to avoid raising basic, higher, or additional income tax rates, which effectively limits his ability to fund a rise in the personal allowance by taxing wealthy individuals. The Institute for Fiscal Studies has suggested that such a change could cost between £8.5 billion and £9 billion annually. Meanwhile, other government initiatives include a planned reduction in the bus fare cap outside London to £2 in January, alongside a VAT cut on household electricity bills, the latter of which has sparked debate over its funding source.
