The Government made the difficult but necessary decision to maintain income tax thresholds, including the Personal Allowance (PA), until April 2028 to ensure the tax system supports strong public finances.

Maintaining these thresholds is universal, progressive and fair. The highest earners will contribute more of the revenue.

The Government has increased the PA by over 40 per cent in real terms since 2010, ensuring some of the lowest earners do not pay income tax. Thanks to the PA, in 2021-22 around 30 per cent of earners did not pay tax. If the PA had been uprated by inflation every year since 2010-11, it would be £8,765 in 2022-23, which is £3,805 lower than its current level of £12,570.

The PA is high by international standards – it is one of the most generous personal tax allowances in the OECD and highest in the G7.

The Government is committed to supporting hard-working families and is keeping the historic increase in the National Insurance starting thresholds introduced in July 2022 to ensure that individuals can earn £12,570 tax free.

The Government is committed to ensuring individuals keep more of what they earn and making the UK a more attractive place to live and work, whilst ensuring the UK’s economic stability. This includes having an income tax system that is already highly progressive; the top 5 per cent of income tax payers are projected to pay half of all income tax, and the top 1 per cent are projected to pay over 28 per cent of all income tax in 2022-23.

The Government understands that people are worried about the cost of living challenges ahead. That is why decisive action has been taken to support households across the UK through cost of living challenges ahead, whilst remaining fiscally responsible.

The Government has announced further support for next year designed to target the most vulnerable households, which will also benefit those who do not pay income tax. This cost of living support is worth £26 billion in 2023-24, in addition to benefits uprating, which is worth £11 billion to working age households and people with disabilities.

This action taken by the Government means that over 8 million of the most vulnerable households across the UK will continue to be supported through next winter via additional Cost of Living Payments. The Government will provide households on means-tested benefits with an additional Cost of Living Payment of £900 in 2023-24. In the same year, pensioner households will receive an additional £300 Cost of Living Payment, and individuals on disability benefits will receive an additional £150 Disability Cost of Living Payment. The Government is continuing to provide support to all households through the Energy Price Guarantee, which will save the average UK household £500 in 2023-24.

This support for 2023-24 is in addition to the generous support already in place to support households this winter. In addition to the Energy Price Guarantee, the Government has announced £37 billion of support for the cost of living in 2022-23. As part of this financial year’s cost of living support millions of the most vulnerable households will receive £1200 of support this year through the £400 EBSS, £150 Council Tax rebate and one-off £650 Cost of Living Payment for those on means-tested benefits, with additional support for pensioners and those claiming disability benefits.

The Government’s approach to delivering fiscal sustainability is underpinned by fairness, with those on the highest incomes paying a larger share. By taking the responsible decisions needed to achieve fiscal sustainability, the Government is providing the necessary conditions for economic growth. The Government is taking a balanced approach between revenue raising and spending restraint, whilst protecting vital public services and providing support for the most vulnerable.

HM Treasury