Unified Income Tax
One tax on all income — employment, dividends, capital gains, interest, rental. Four bands. No separate systems.
The measure
All income is taxed the same way, under one of four bands.
| Income | Rate |
|---|---|
| £0 – £25,000 | 0% |
| £25,001 – £100,000 | 25% |
| £100,001 – £250,000 | 42% |
| Over £250,000 | 47% |
Employment, self-employment, dividends, capital gains, interest, rental income, pension drawdowns are all income and all counted together.
We abolish:
- Capital Gains Tax
- Dividend Tax
- Interest Tax
- Myriad complex other rules and reliefs
Pension tax relief is a temporary exemption from Income Tax. You pay nothing on income you put straight in your pension. It is taxed according to your income when you choose to draw it down.
There is no economic justification for taxing work more than passive income.
The UK has had preferentially low capital taxes for decades which hasn’t delivered productive investment or growth.
Work should pay well, at least as well as passive investment.
Expected impact
- Lower paid workers lifted out of taxation
- Most people are better off straight away, with more in their pockets
- A feel-good factor and strong national mood
- Even entry-level work is better than benefits
- In-work benefits bill reduced as take home pay boosted
- Restructuring income to avoid tax becomes pointless
- A simpler and fairer system costs less for individuals and governments
Cost and revenue
| Revenue calculation | Annual |
|---|---|
| Reformed income tax (all income sources, new bands) | £248bn |
| Current income tax revenue (replaced) | −£230bn |
| Net new revenue from income tax reform | +£18bn/year |
Evidence and assumptions
When capital gains are taxed at lower rates than earned income, people structure as much income as a capital gains as possible. This arrangement benefits those with more wealth and more access to expert help. It is unfair to working people.
The argument that capital must be taxed lightly to encourage investment has been tested for decades. What it has produced is a large industry of income disguised as capital and a widening gap between those who work for money and those whose money works for them. Income is income.