Andy Burnham is being told that it’s vital to raise the personal tax allowance to £18,000 – and people only have a four week deadline left to back the plan. A petition on the Parliament website is almost half-way to getting 100,000 signups. If this happens it will be considered for a debate in the Commons – meaning the new Prime Minister’s Treasury will be under pressure to defend the position and lay out potential changes.

It comes as figures show retired people paid approximately £8bn in additional tax last year after a freeze on personal allowances pushed individuals into higher tax brackets, according to newly released figures. The total tax paid by those in retirement rose from £21.1bn to £29.8bn, a surge of more than 40 per cent in just two years, based on the latest pension participation data from HMRC.

Industry experts attributed the increase to so-called fiscal drag, whereby people have been drawn into higher tax bands as thresholds and personal allowances remain frozen. And next year the £12,570 personal tax allowance level freeze – over which people pay 20 per cent on taxable income – will be overtaken by people receiving the full new state pension.

Andy Burnham has confirmed people who exist only on this amount will not pay tax – however more and more people on the lowest incomes are being forced to pay more tax. The petition, which people have until September 30 to back, said: “Raise the personal tax allowance to £18,000. Since 2021 personal tax allowance has been frozen at £12,570. This freeze was due to expire this year but the Chancellor of the Exchequer has extended it to 2031. We want to keep some more of our own money.

“If you are earning minimum wage then you may soon be paying tax because of fiscal drag. Some higher earners pay little or no tax due to clever use of accounting rules. We think this is so wrong.”

Andy Burnham said when he became Prime Minister that the personal tax allowance was the key issue he had head on doorsteps when campaigning and it had ‘lodged in my mind’. However the government has since said that currently changes to this will not form part of initial cost of living aid plans.

Steve Webb, partner at LCP and former pensions minister, said: “The constant freezing of tax thresholds and allowances has dragged millions more people into paying higher rates of income tax. The flip side of this is that when they pay into a pension they get more tax relief, leading the cost of tax relief to soar.

“But frozen personal allowances mean that the number of pensioners paying income tax has also written steeply, and the tax bill on pensioners is up dramatically. In all the discussion about fairness between generations it is important to remember that pensioners are also paying growing amounts back to the exchequer.”

The number of higher rate taxpayers reached 6.6m during the last financial year, pushing up the cost of tax relief on pensions. The total bill for income tax relief on pensions leapt from £47.8bn in the 2023/24 tax year to £60.4bn in 2024/25, HMRC confirmed, as reported by City AM.

Webb noted that while the government might be inclined to cut tax relief to reduce this expenditure, doing so is “very difficult halfway through a Parliament”. “Any change would be complex and technical and could take years to implement. It would deliver little money this side of the next election but would be hugely politically unpopular. The Government may well conclude that it simply has to live with the rising cost of tax relief for now,” he said.

Because the petition reached 10,000 signatures the Treasury issued a response. It said: “The Government currently has no plans to increase the Personal Allowance to £18,000. Increasing the Personal Allowance to £18,000 would come at a significant fiscal cost of over £40 billion per year.

“The Government is committed to keeping taxes for working people as low as possible while investing in public services and not taking risks with the economy. The previous government froze the main income tax thresholds from 2021/22 until 2027/28 – this means the Personal Tax allowance was not due to rise until April 2028 at the earliest.

“To ensure that the Government can deliver on the public’s priorities, at Budget 2025 it was announced that the personal tax thresholds, including the Personal Allowance, would be maintained at their current levels for a further three years to the end of this decade.

“The Government currently has no plans to increase the Personal Allowance to £18,000. Increasing the Personal Allowance to £18,000 would come at a significant fiscal cost of over £40 billion per year. This would also benefit higher earners more than basic-rate taxpayers on average.”

To back the petition and read the full Treasury response, click here