Tax-free allowances under scrutiny as thresholds remain frozen

Summarised from 2 outlets · Updated 12 Oct, 10:48 · Archive

Two major UK tax allowances have remained unchanged for years, affecting thousands of households and redundant workers.

The Personal Allowance has been frozen at £12,570 since 2021, with current government plans to extend this freeze until 2031. The Daily Express reports that this frozen threshold has pushed two million people into higher tax bands due to 'fiscal drag', where wages increase with inflation but tax bands do not, leading to higher tax bills. The Personal Allowance can be increased through certain schemes including marriage or civil partnership, and some methods allow backdating.

The tax-free limit on redundancy pay presents a separate issue. The first £30,000 of statutory and enhanced redundancy pay combined is tax-free, a threshold that has remained unchanged since April 1988. The Mirror reports that in September 2026, 50,904 proposed redundancies were notified in Great Britain, the highest monthly total since October 2020, up from 19,557 in August.

Experts have questioned whether the redundancy allowance remains appropriate. Kate Underwood, founder and chief people strategist at Kate Underwood HR & Training, told The Mirror that the £30,000 limit is 'old enough to have been made redundant itself' and argued it should now be £85,000 to reflect current living costs. The Chancellor is set to deliver his first Budget on 28 October, but experts said there was no indication the redundancy allowance would change.

How it is being reported

• £30,000 tax-free allowance 'not risen since 1988' and 'should be £85,000' as 51,000 in UK affected in one monthIt has remained unchanged for 38 years and one expert said it should now be £85,000The Mirror · 12 Oct, 10:31
• HMRC confirms tax-free Personal Allowance rises to £13,830 for households with backdatingUK households can use a 'backdating' method to get a massively boosted £13,830 Personal Allowance fully tax-freeDaily Express · 10 Oct, 18:49

In this story: HMRC · Andy Burnham · John Healey · Kate Underwood · Great Britain

This summary was written by AI from the headlines and standfirsts above, and states as fact only what at least two outlets report. How we use AI · Report a problem