£12,570 tax threshold freeze: unions press Healey to reverse it in Budget

Unite, the UK's second biggest union, has called on John Healey to reverse the freeze on income tax thresholds. The freeze keeps the tax-free Personal Allowance at £12,570, and then-Chancellor Rachel Reeves set it to last until 2031. According to the BBC, Unite made the demand on Thursday, when unions that donate to Labour met Healey ahead of next month's Budget. The unions also brought other proposals, including higher taxes on tech companies.

The BBC reported that the unions believe Healey's first Budget will set the direction Andy Burnham takes as prime minister. Burnham himself said people raised the threshold freeze on the doorstep while he was campaigning to return to Westminster as MP for Makerfield. For working people the problem is simple. When pay goes up but the thresholds stay put, more of each pay packet gets taxed.

How frozen thresholds pull more people into tax

The BBC reported that the basic rate of 20% is paid on annual earnings between £12,571 and £50,270, and the higher rate of 40% on earnings between £50,271 and £125,140. Government guidance confirms the standard Personal Allowance of £12,570 for the tax year running from 6 April 2026 to 5 April 2027. Because these limits are not being raised in line with inflation, a pay rise that only keeps up with prices can still push someone over a line.

Unite leader Sharon Graham said the threshold of around £12,500 "would have moved up to over £16,000 now" if it had not been frozen for the past few years. "People at the lower end are paying eye-watering amounts of tax," she said. "We must see things happen immediately," she added, and said she had told Burnham that working class people had to be made to believe "their best days are in front of them".

Unite was not the only union with a list. Unison, the country's biggest union, wants higher taxes on large tech companies to pay for public sector investment and the move to green energy. It also wants the Treasury to commission research into whether tax should shift from income towards wealth. GMB leader Gary Smith wants the Rosebank and Jackdaw fields in the North Sea approved to raise revenue, and he wants the Budget to give the construction industry confidence, pointing to "half a million bricks stockpiled in this country".

Who the freeze is catching

According to the BBC, the freeze hits two groups. More lower paid people are paying income tax for the first time. More better-off workers, including public service workers such as senior nurses, police officers and teachers, are now paying tax at the higher rate.

Higher earners also face a taper. Official guidance says the Personal Allowance goes down by £1 for every £2 that adjusted net income is above £100,000, so the allowance is zero if your income is £125,140 or above. People who claim Blind Person's Allowance can earn more before they start paying tax, because that allowance is added on top of the Personal Allowance.

The government notes that income tax bands are different in Scotland, so Scottish taxpayers should not assume the figures above apply to them. Nobody has published how much an individual worker would gain if Unite got its way, because no change has been announced.

Key numbers

• £12,570: the standard Personal Allowance, the amount of income you do not pay tax on.
• 2031: the year the threshold freeze is due to last until, under Rachel Reeves's last Budget.
• £16,000: Sharon Graham says the threshold would now be over this figure if it had not been frozen.
• £50,270: the top of the basic rate band. Earnings above this are taxed at the 40% higher rate.
• £125,140: the level at which the higher rate band ends and the Personal Allowance disappears completely.
• £9bn: roughly what the TUC says reversing the cut in the bank surcharge would raise to help pay energy bills.

What happens before next month's Budget

Nothing has changed yet. Thursday's meeting was for the unions to set out their demands, and the BBC report does not give an exact date for next month's Budget. Unison general secretary Andrea Egan does not expect dramatic change straight away, but she does expect a new direction to be mapped out, and her union wants Labour to show it is not just "continuity Starmer" with a more affable face. The BBC reported that Healey made clear tough choices would be taken where necessary, but he doubled down on his commitment to give businesses and workers a bit of breathing room where he can.

Over the next couple of weeks, TUC officials and unions that do not donate to Labour will also meet Healey. TUC leader Paul Nowak wants the last government's cut in the bank surcharge reversed to raise around £9bn to subsidise energy bills. He also wants the remit of the OBR, the Budget watchdog, changed so that it counts the value of long term investment. A decision on Rosebank and Jackdaw looks unlikely until after the October by-election in Sir Keir's former seat in north London, although the government says the timing is out of its hands.

What you can do now

Check which tax band your earnings fall into using the government's Income Tax rates and Personal Allowances guide. It sets out the £12,570 allowance and the bands for the current tax year. If your pay is close to £50,270, a modest rise could take part of your income into the higher rate, so it helps to know where you stand.

If you are blind or severely sight impaired, check that you are claiming Blind Person's Allowance, which the government says is added to your Personal Allowance. If you live in Scotland, look at the Scottish bands instead, because they are different.

Watch for the Budget announcement next month to see whether the thresholds change. If you want to give your view on tax policy, write to your local MP.

Your questions answered

Is the £12,570 tax-free allowance going up?

Not at the moment. Then-Chancellor Rachel Reeves froze the thresholds until 2031 in her last Budget, and Unite's call to reverse the freeze is only a demand. We will not know whether Healey acts until his Budget next month.

Why does a frozen threshold cost me money?

The BBC explains that because the bands are not raised in line with inflation, more lower paid people start paying tax and more workers move into the 40% band. Sharon Graham of Unite says the threshold would be over £16,000 now if it had not been frozen.

What else are the unions asking for?

Unison wants higher taxes on large tech companies and research into taxing wealth rather than income. The GMB wants the Rosebank and Jackdaw fields approved and help for house building. The TUC wants the bank surcharge cut reversed to help with energy bills.