Labour says tax thresholds won't change after election

end of year working out inland revenue tax self assessment form with calculator
[Getty Images]

Labour will maintain Conservative plans for income tax thresholds to remain frozen if it wins the election, the shadow business secretary has said.

Jonathan Reynolds told the BBC he needed to be “candid” that Labour would continue with the plans. saying they amounted to a "tax rise".

The freeze on the personal allowance - the amount of money you can earn before any tax starts to be paid - is already set to continue until 2028.

The plans make tax increases inevitable as wage rises push more people above the tax-free income threshold.

Labour Leader Sir Keir Starmer has argued his party would not bring in tax rises for working people if they form the next government.

A graphic which reads 'more on general election 2024'

His comments come amid a continuing row about Mr Sunak's claim that Labour's plans would mean "£2,000 in higher taxes for every working family in our country".

BBC analysis found the claim risked misleading voters.

The figure was based on assumptions about Labour's spending divided by working households over four years.

The claim has also been criticised by the UK statistics watchdog and a letter from Treasury permanent secretary James Bowler said it should not be presented as civil service work.

But the Conservatives have stuck by the comment.

During the BBC's election debate on Friday, Conservative minister Penny Mordaunt said: "Keir Starmer confirmed this earlier this week - they are going to put up your taxes by £2,000 per working household."

Labour deputy leader Angela Rayner replied "that is a lie", adding that the government has raised taxes to a "record level".

Labour plans

Shadow chancellor Rachel Reeves had previously described the government’s decision to freeze income tax thresholds as “picking the pockets” of working people.

But in the run-up to the election, Labour vowed to maintain government tax and spending plans, instituting a "fiscal lock" requiring a forecast from the Office for Budget Responsibility for any major changes.

Currently no income tax is paid on the first £12,570 a person earns - known as the "personal allowance".

Economic think-tank the Resolution Foundation has said plans set out in the last budget - amount to a series of tax rises that will cost the average household an extra £800 a year by 2028-29.

The biggest increase will be from the continued freezing of all income tax thresholds - not just the personal allowance. The income tax thresholds have not risen with inflation since 2021 and will likely stay fixed until 2028.

A separate think-tank, the Institute for Fiscal Studies, has warned this would bring 4.5 million more people into higher income tax thresholds by 2028.

On Saturday, Ms Reeves avoided answering whether she agreed with Mr Reynolds that keeping tax thresholds frozen amounted to a tax rise.

Instead, Ms Reeves said: "I want taxes on working people to be as low as possible.

"Under the Conservatives, the tax burden is at a 70-year high. That is why I've pledged not to raise income tax, national insurance, or VAT."

Appearing on BBC Breakfast on Saturday, Mr Reynolds admitted that Labour would push ahead with the government’s decision to freeze thresholds.

“If we were to form a government after the general election on 4 July, we would inherit the government’s spending plans,” he said.

“Now, I’ll be candid, there are in those plans tax rises. I mean, the personal allowance we all get in terms of our income tax, that is set to be frozen for several years.

“So, we are ambitious about how we think we can grow the economy to give people better times ahead, but I will be candid and say those are the plans that we would inherit.”