A separate protection has been promised for people whose only income is the State Pension if their payments exceed the tax-free threshold. This does not amount to a general personal allowance increase, and detailed eligibility rules have not yet been published.
Is the personal allowance increasing in 2026?
No. The standard personal allowance remains ÂŁ12,570 for the 2026/27 tax year and is currently scheduled to stay frozen through 2030/31.
Most people can earn up to the allowance before income tax becomes payable. Income from ÂŁ12,571 to ÂŁ50,270 is generally taxed at 20% in England, Wales and Northern Ireland, while Scotland uses separate bands.
The allowance starts reducing when adjusted net income exceeds ÂŁ100,000 and disappears completely at ÂŁ125,140. Tax codes and individual circumstances can alter the amount available.
Why did Andy Burnham raise the issue?
Burnham said concern about the frozen threshold was repeatedly mentioned by voters during his Makerfield by-election campaign. He initially suggested that the issue deserved consideration before clarifying that he had made no immediate policy commitment.
The allowance has remained at ÂŁ12,570 since the 2021/22 tax year. When wages and pensions increase while the threshold stays unchanged, more income becomes taxable without the government raising the headline tax rate. This is known as fiscal drag.
The effect can become more noticeable while households are managing UK inflation and higher living costs.
How much could taxpayers save?
Any saving would depend on the size of a future increase. A basic-rate taxpayer receiving the full allowance would normally save ÂŁ20 annually for every ÂŁ100 added to the threshold.
For example, a £500 increase could reduce that person’s yearly tax bill by up to £100. Someone earning below £12,570 would receive no direct income-tax benefit, while higher earners whose allowance is tapered may not obtain the full saving.
A nationwide increase would also reduce Treasury revenue by billions of pounds. Burnham has acknowledged that the cost makes an immediate change difficult as the government seeks to maintain fiscal discipline.
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Will State Pension recipients pay income tax?
The State Pension is taxable income, although tax is not deducted before it is paid. A person normally becomes liable when total taxable income—including the State Pension, workplace pensions, earnings and savings income—exceeds their available allowance.
Chancellor John Healey said on July 24 that pensioners relying solely on the State Pension would not be required to pay income tax if the full payment rises above ÂŁ12,570 from April 2027.
The final 2027/28 State Pension rate has not been confirmed. Complete rules explaining how the protection will operate are also still awaited.
The commitment may not protect someone receiving additional taxable income. HMRC’s official State Pension tax guidance explains that tax liability is based on a person’s combined taxable income rather than the pension payment alone.
What cost-of-living support is confirmed?
The government’s initial package includes temporarily removing VAT from domestic electricity bills from October 1. Officials estimate that the measure will save a typical household around £45 annually as families assess the impact of the July 2026 UK energy price cap increase.
A £2 maximum single fare will also apply on participating buses in England outside London from January 1 through December 31, 2027. These measures do not change anyone’s personal allowance.
What should taxpayers do now?
Workers and pensioners should continue using the ÂŁ12,570 threshold when calculating their 2026/27 tax position. The next Budget is the earliest likely opportunity for a formal change.
Any confirmed proposal would need to identify the revised allowance, effective tax year, eligible taxpayers and funding source. Until those details are officially published, claims that the threshold has already increased are incorrect.
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