Personal allowance hike on the menu at October Budget
The Chancellor is weighing up proposals to raise the personal allowance at next month’s Budget in what could be the biggest shake-up to income tax rules in years. John Healey is reportedly considering unfreezing the income threshold at which earners start paying tax from £12,570 to as much as £15,570. The unfreezing would be the [...]
The Chancellor, John Healey, is considering raising the personal allowance at the upcoming October Budget, potentially marking the largest change to income tax rules in years. The proposal would unfreeze the income threshold at which individuals start paying tax from £12,570 to as high as £15,570. This would be the first increase in personal allowance since 2021.
Proponents argue that the additional £3,000 could significantly boost the economy, with Dale Vince, founder of Ecotricity, claiming it could generate 1.2% growth. However, Healey is also contemplating tax hikes in other areas, such as increasing capital gains tax, to offset potential revenue shortfalls. Former Conservative Treasury minister Sir David Gauke expressed skepticism, questioning how much the banking sector could contribute without harming competitiveness.
The move comes after then Chancellor Rachel Reeves froze personal allowance and other income tax thresholds until 2031 in November of the previous year due to rising costs following the Russian invasion of Ukraine. The Office for Budget Responsibility (OBR) estimates that freezing income tax thresholds would raise £8 billion annually by 2029.
Other tax proposals under consideration include expanding the 'Mansion Tax' and implementing business rates reform.
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