Rachel Reeves’ tax-free Personal Allowance scam is her biggest betrayal of working people

Chancellor Rachel Reeves and Labour promised not to raise taxes on working people but they’re slapping us all with higher tax bills, writes Alex Evans.

Rachel Reeves has chosen to break Labour’s key election promise, says Alex Evans (Image: Getty)

“Labour will not increase taxes on working people.” That was the key promise by which Labour was handed a mandate by the British people.

Since then, Chancellor Rachel Reeves has fudged along the edges of that pledge, increasing employer National Insurance and arguing about the definitions of working people.

But one policy, announced in the Budget in November and set to apply to the new tax year starting in April, is the most clear and obvious violation of that promise to date: the freeze on the tax-free Personal Allowance.

This is the amount of money working people can earn before they have to begin surrendering some of their earnings to HM Revenue and Customs in the form of Income Tax.

The year I began working (yes, I’m old now), it was set at £6,475 per year. The following year, it was raised to £7,475. The increases are to cover inflation, so that as wages rise and prices rise, working people can keep the same amount of money in their pocket in real terms, maintain the same spending power, before losing cash to tax.

Indeed, it was increased every year, all the way to 2019, when it was boosted to £12,500. Then it was held at this level until 2021, when the Conservatives gave it a measly £70 increase to £12,570, and this is where the wheels fell off.

The Tories chose to freeze this allowance until 2028 and then, when they handed the baton to ‘pro working people’ Labour, Rachel Reeves promptly chose to copy that tactic and freeze it again. In the latest Budget, the Chancellor announced it will be frozen for another staggering five years, all the way to 2031.

At the same time, the ‘higher rate’, threshold of £50,270 is also being frozen until 2031.

This is a tax rise on working people. There’s no other way to frame it.

As wages rise – even minimum wage – more and more working people are going to pay more and more tax, both those pushed over the £12,570 threshold for the first time and others, thanks to inflation, pushed over the 40% bracket.

Indeed, the last time the £50,000 bracket was raised by more than £70, in 2019, £50,200 was the equivalent of roughly £65,000 in 2026 money. If it had kept up with inflation, the bracket should have been moved to £65,000 and millions of workers would have avoided paying higher 40% tax bills on the wages above that threshold.

On the lower end, the tax-free allowance of £12,500 in 2019 is worth approximately £16,215 in 2026. Again, this is where the threshold should be if it had kept up with inflation. The decision to freeze the limits is pinching money straight out of workers’ wallets.

While both parties deserve a kicking for these decisions, and I do think Labour has done some good things so far, like cutting energy bills and hospital waiting lists, while Starmer’s been pretty strong on Ukraine and Trump, Labour is in charge of our finances now and Labour is the party which promised, clear as day, not to raise taxes on working people.

Rachel Reeves has smashed that promise with a fiscal hammer and is actively raiding already squeezed working people’s incomes by allowing their HMRC Income Tax bills to spiral.

What’s equally insulting is that state pensioners have been given a bye. Many hands have been wrung and pearls clutched about how the state pension is set to exceed the tax-free Personal Allowance threshold, as of 2027. Rachel Reeves then hopped onto the Martin Lewis Show to cheerily announce that state pensioners would simply be handwaved into an exemption from paying tax when they break the threshold.

That’s great, happy for them, meanwhile the workers have been left to pick up the tab once again and literally left to pay for Ms Reeves’ broken promises.