Burnham pulls back on suggestion to increase tax-free personal allowance

Andy Burnham has withdrawn a proposal to increase the tax-free personal allowance.

The £12,570 threshold has been frozen since 2021, resulting in more people being dragged into paying tax as earnings rise.

Burnham told the Times at the weekend that the “frustration with personal allowances” he felt while campaigning in the Makerfield by-election had “settled in my mind”.

The Prime Minister later told reporters on Monday that “all of this will be looked at” in the next budget but acknowledged that any changes would be expensive and “difficult given the financial circumstances we are in”.

Those close to Burnham have since told BBC News that any changes to personal allowances were not part of her initial plan to tackle living costs.

This came after Burnham told his first cabinet meeting: “We have to show fiscal discipline. We have to show that our commitment to the fiscal rules is genuine and that we are prepared to take tough decisions on that.”

Burnham stuck to Labour’s 2024 manifesto, which includes a pledge not to increase basic, higher or additional income tax rates.

This would rule out increasing the top rate of income tax paid by high earners to offset the cost of removing the personal allowance.

The Institute for Fiscal Studies estimates that unraveling the threshold could cost £8.5-9bn a year.

“It kind of shows that I can see the issue and the impact it’s having,” Burnham said Monday.

He told reporters it would be “looked at” in the Budget, but added: “Clearly that’s difficult given the financial circumstances we’re in.”

There are “no plans” to announce any changes to the £12,570 personal allowance “in the short term”, government sources told the Telegraph on Tuesday.