Labour reveals plan for income tax increase
21st November 2019
Around 1.6 million higher earners face the prospect of paying more income tax in 2020/21 if Labour forms the next government.
Its manifesto announced the party's intention to raise income tax for those with salaries above £80,000 a year.
The 45% rate of income tax would apply to incomes above £80,000, followed by the introduction of a new 50% rate on income above £125,000.
The Institute for Fiscal Studies (IFS) claimed the move would cost people earning between £100,000 and £150,000 between £1,000 and £5,375 a year.
A string of income tax increases have affected higher earners since 2010, including the introduction of the additional rate (45%) of income tax.
The withdrawal of the personal allowance, cuts in income tax relief for private pension contributions and real-term reductions in the higher-rate threshold also began to bite.
The IFS said more taxpayers - up to 1.9 million - are expected to fall into these income tax bands by 2023/24 if this fiscal plan is implemented.
Xiaowei Xu, research economist at IFS, said:
"Labour is proposing a substantial tax rise on the highest-income 3% of adults.
"This could raise some money but it comes with risks as those with the highest incomes are likely to respond to the tax rise by reducing their pre-tax incomes.
"We are already extraordinarily dependent on this small group of individuals for tax payments - they account for half of income tax revenues today."
The Liberal Democrats left the income tax rates and bands alone in its manifesto, while the Conservative Party is yet to release its manifesto.
Speak to us about income tax planning.