Chancellor Rachel Reeves is facing mounting pressure to get rid of a hated “stealth tax” in her upcoming Spring Budget on March 26.
Specifically, petitions urging the Chancellor to increase the tax thresholds has gathered significant support in recent weeks and months.
These campaign come amid growing concerns over the freeze to the personal allowance of £12,570, which has remained unchanged since 2021.
Campaigners are calling for the threshold to be raised to help pensioners and low-income earners who are increasingly being pulled into higher tax brackets due to “fiscal drag”.
Rachel Reeves is being urged to review the tax allowances to stop a “stealth” raid on pensioners and workers
GETTY
Dennis Reed, a campaigner for Silver Voices, launched a petition on change.org amid concerns over the frozen personal allowance.
He is urging the Chancellor to “increase the tax threshold for state pensioners by at least £1,000 in her Spring Statement”.
Reed also wants a commitment to increase the threshold in line with triple lock increases, which determines the annual rate hike for the state pension.
This campaign comes alongside strong calls for the personal tax allowance to be increased from £12,570 to £20,000 in the upcoming statement.
Do you have a money story you’d like to share? Get in touch by emailing [email protected].
A separate petition on the Parliament website making this request has already gathered more than 170,000 signatures.
Reed has expressed concern that due to frozen tax personal allowances, the top of the new state pension may breach the current personal allowance of £12,570 by 2026.
This would create what he calls a “ludicrous situation” where the state pension safety net, already paid for through national insurance and tax, would be taxed again.
He warns that many more pensioners across the country could be plunged into poverty as a result of this “political choice”.
Pensioners who signed the petition have expressed frustration about their treatment. One signatory said: “We are not all wealthy pensioners.
“The majority of pensioners have their state pension and a small private pension that takes them over the threshold to claim pension credit.”
Another commented: “We pay huge amount of tax during our working life whilst we plan and save for our retirement, only to get taxed again on our savings and pension.”
A third pensioner added: “Like most pensioners I have worked for 40 years took out a small private pension, never claimed benefits.. now I am getting taxed and didn’t get any Winter Fuel Allowance.”
Finance expert Fiona Peake from Ocean Finance has warned about the impact of frozen income tax thresholds on the cost of living.
“Many are concerned about the extension of the freeze on income tax thresholds beyond 2028. This would mean more people paying higher tax rates without an official increase,” Peake said.
She explained the hidden tax increase: “If your wages rise but the tax bands stay frozen, you could end up paying more tax without realising it.”
This “fiscal drag” effect has already pulled millions of low-wage earners into the income tax net since thresholds were frozen in 2021.
LATEST DEVELOPMENTS:
More people are being dragged into higher tax brackets due to fiscal drag
GETTY
The Treasury has responded to calls for raising the personal allowance to £20,000, stating there are “no current plans” to provide such additional financial support.
A spokesperson said: “The Government is committed to keeping taxes for working people as low as possible while ensuring fiscal responsibility.”
They added that increasing the personal allowance to £20,000 would come at a “significant fiscal cost of many billions of pounds per annum”.
This would “reduce tax receipts substantially, decreasing funds available for the UK’s hospitals, schools, and other essential public services that we all rely on,” the Treasury stated.
