Chancellor John Healey is reportedly weighing up proposals to increase the personal allowance at the upcoming Budget next month. The income threshold at which earners begin paying tax could rise from its current £12,570 to as much as £15,570.
This potential unfreezing of the personal allowance would be the first such increase since 2021. Proponents of the plan suggest the additional £3,000 could provide a significant boost to the economy.
However, Healey is also reportedly considering other tax adjustments to offset potential revenue shortfalls for the Exchequer. These include increasing capital gains tax and potentially lowering the 'Mansion Tax' threshold from £2m to £1.5m, which could mean properties valued at £1.5m or more would incur an additional annual charge of at least £1,500.
Former Conservative Treasury minister Sir David Gauke has expressed scepticism regarding the planned unfreezing of the personal allowance, particularly concerns about raising significant funds from the banking sector without impacting competitiveness, especially lending to small businesses. A Treasury spokesman stated that tax decisions are for the Chancellor to announce at fiscal events, declining to comment on speculation.