Million more Britons to pay income tax as Burnham abandons personal allowance pledge
An additional million workers and pensioners will be liable for income tax this year after Prime Minister Andy Burnham retreated from his commitment to raise the personal allowance, as a decade-long freeze in tax thresholds continues to drag increasing numbers into the tax net.
The £12,570 personal allowance has remained unchanged since April 2021, when then-Chancellor Rishi Sunak announced a four-year freeze as part of his March 2021 Budget. That freeze, originally set to end in 2025/26, was subsequently extended by Chancellor Rachel Reeves in the 2025 Budget and will now remain in place until April 2031—making it the longest such freeze in modern UK tax history.
HMRC estimates that 31.4 million people will pay basic-rate income tax this year, up from 27.4 million when the freeze began. Fresh analysis by the Taxpayers' Alliance reveals that one million additional taxpayers will each pay an average of £640 more in income tax this year compared to two years ago.
Pensioners particularly hard hit
The freeze has created acute pressure for pensioners as the state pension approaches the tax threshold. For 2026/27, the full new state pension stands at £241.30 per week—equivalent to £12,547.60 annually—placing it just £22.40 below the personal allowance. This 4.8% increase from the previous year's £230.25 reflects the triple lock mechanism, which guarantees annual pension rises by the highest of inflation, average earnings growth, or 2.5%.
Over the past four years, the state pension has surged more than 30%, from £185.15 per week in 2022/23 to its current level. Meanwhile, the personal allowance has remained static, creating a collision course that will push 630,000 additional pensioners into the income tax system this year, bringing the total number of pensioner taxpayers to 10.2 million.
U-turn after election promises
The policy reversal comes after Burnham told The Times over the weekend that voter concerns about the personal allowance during his Makerfield by-election campaign had 'lodged in my mind'. Burnham won the seat on 18 June 2026 with nearly 55% of the vote, defeating Reform UK by more than 9,000 votes, after sitting Labour MP Josh Simons resigned to enable Burnham's return to Parliament.
Speaking to reporters on Monday, the Prime Minister said the issue would be 'looked at' in the autumn budget but acknowledged that any change would prove expensive. His allies have since clarified that no commitment was made and that personal allowance changes were not part of the cost-of-living measures announced this week.
The scale of fiscal drag
If the personal allowance had kept pace with inflation since 2021, it would stand at approximately £17,380 today—nearly £5,000 higher than the frozen threshold. This phenomenon, known as fiscal drag, has become a crucial revenue generator for the Treasury. The freeze is projected to raise £55 billion by 2030, whilst uprating the allowance in line with inflation would cost the Exchequer an estimated £9 billion.
Income tax generated £306 billion in 2024/25, making it the government's largest revenue source—exceeding the combined total of National Insurance contributions (£171 billion) and VAT (£173 billion). The fiscal importance of this revenue stream helps explain the government's reluctance to abandon the freeze despite mounting political pressure.
Higher earners also affected
The threshold freeze has simultaneously impacted higher earners, with 410,000 more people expected to pay the 40% higher rate this year as their incomes exceed £50,270. An additional 70,000 will enter the 45% additional rate band, which was lowered from £150,000 to £125,140 in April 2023—the point at which the personal allowance is fully tapered away for high earners.
Office for Budget Responsibility forecasts indicate that the proportion of taxpayers paying higher or additional rates will surge from 15% in 2021 to 24% by 2030/31. Regional disparities are stark: a quarter of London taxpayers now pay the higher rate, compared to just 14.4% in the North East.
John O'Connell, chief executive of the Taxpayers' Alliance, said:
A million more Britons are being caught in the taxman's net by stealth. Freezing thresholds lets ministers rake in billions without admitting they have raised taxes, hitting workers, pensioners and families across the country. If Andy Burnham really wants to give hard-working taxpayers breathing space, he should end fiscal drag and unfreeze tax thresholds.
Despite Burnham's advocacy for wealth taxes on higher earners, the analysis shows the top one per cent of income taxpayers are expected to earn 12.8% of total income whilst paying 26.6% of income tax.
