03
Progressive Income Tax
One transparent system, taxed at the margin.
A single progressive Income Tax structure with five marginal bands, designed to be read alongside the Universal Standard Income, the abolition of employee National Insurance and reform of the Personal Allowance.
Published Manifesto 1.0 policy. The sections below set out the proposal as published. Questions and challenges are open questions, not settled answers.
Key figures
- Bands
- 5 marginal rates
- Lowest rate
- 33%
- On the first £40,000 of income.
- Highest rate
- 49%
- On income above £250,000.
- Employee NI
- Removed
- See Proposal 02.
01 · The Idea
Proposal 03 would replace the current structure of taxes on earnings with one progressive Income Tax made up of five marginal bands.
Crucially, these are marginal rates. Someone earning £45,000 does not pay 40% on all of it: the 40% rate would apply only to the £5,000 falling inside that band.
02 · How it works
The proposed bands run from 33% on the first £40,000 of income up to 49% on income above £250,000, as set out in the table above.
The structure forms part of the wider settlement involving the Universal Standard Income, the abolition of employee National Insurance, and reform of the Personal Allowance.
As the USI progressively rises, the conventional Personal Allowance progressively reduces. At the intended Year 10 structure there would be a £12,570 USI benchmark, no conventional Personal Allowance, no employee National Insurance, and progressive Income Tax from the first pound earned.
| Band of income | Marginal rate |
|---|---|
| £0 – £40,000 | 33% |
| £40,001 – £50,000 | 40% |
| £50,001 – £150,000 | 45% |
| £150,001 – £250,000 | 47.5% |
| £250,000+ | 49% |
These are marginal rates. A higher rate applies only to the portion of income falling within that band — never to the whole of a person's income.
The intended Year 10 structure
- £12,570 USI benchmark
- No conventional Personal Allowance
- No employee National Insurance
- Progressive Income Tax from the first pound earned
03 · Why it is being proposed
The intention is a system whose true rate on work is visible in one place rather than split across two deductions and an allowance taper.
The meaningful comparison is therefore not “33% tax”. The model is intended to be understood through the combined effect of USI received, employee National Insurance removed, and Income Tax paid.
No claim is made that this structure has been independently validated or certified by the Office for Budget Responsibility.
What this proposal does not say
- All rates shown are marginal rates applying only to income within each band.
- The proposed system has not been independently validated or OBR-certified.
04 · Questions & Challenges
Nothing in Manifesto 1.0 is presented as settled fact. These are open questions the proposal must be able to answer — they are not answered here.
- 01What does the combined effect of USI, no employee NI and these bands mean in cash terms for a low earner, a median earner and a higher earner?
- 02Does a 33% starting rate on the first pound earned weaken incentives at the bottom of the income distribution, and does the USI fully offset it?
- 03What are the behavioural and migration risks at the 47.5% and 49% rates?
- 04How is the loss of the Personal Allowance handled for people who would receive little or no USI?
- 05Do the bands raise enough to fund the USI, and what is the assumed dynamic effect — if any?
- 06How would the thresholds be indexed over time?
Have Your Say
What is your view on this proposal?
Scrutiny, not endorsement. Disagreement is as useful here as support.
Responses are counted anonymously and the running totals are shown publicly beside each option. One response per device, changeable at any time.
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