POLITICS

Ukip's 35p Income Tax Pledge Will Help The Rich Most, Experts Say

29/01/2015 09:36 GMT | Updated 29/01/2015 11:59 GMT
Schifres Lucas/ABACA
9:30 AM. Leader of UK Independence Party (UKIP) and Member of European Parliament Nigel Farage wears Sterling Pound socks in his office at the European Parliament in Strasbourg, France, on March 12, 2013. Photo by Lucas Schifres/Pictobank/ABACAPRESS. COM

Nigel Farage's flagship tax pledge, promising to cut the rate of tax for higher earners to 35p, will actually help the richest taxpayers most, experts have said.

The proposal to introduce a 35p income tax rate between £42,285 and £55,000 was included by the party in a widely trumpeted list of '100 reasons to vote Ukip", released on Wednesday with just 100 days to go before the general election. The party said it would end up "taking many public sector workers out of top rate of tax".

However, experts pointed out that the proposal would help the richest 25% of Britons most, and may actually penalise the moderately well-off at the expensive of the even richer.

Peter Davis a senior tax lawyer at the City law firm gunnercooke, told the Huffington Post UK: “The proposal sounds like it may not have been fully thought through. Currently earnings between £31,865 and £42,285 are taxed at 40%. Ukip might be suggesting that tax on this slice is reduced to 20%, or they might be suggesting that tax on this slice remains at 40% and then goes down to 35% for those who earn over £42,285 - which would be illogical at best. More information is needed, including cost, which they don’t seem to be supplying at the moment.”

“As the average public sector earnings are around £30,000 per year, Ukip’s proposal appears to help only those earning significantly more than the average in that sector. Therefore the proposal would benefit some in the top 25% of earners, but would be hard to justify to the general public.”

Chas Roy-Chowdhury, head of tax at the Association of Chartered Certified Accountants (ACCA), said: “When it comes to the introduction of a 35p tax rate, it is true that the more you earn, the more you’ll potentially save. For the very highest earners, this could clearly lead to very significant reductions in tax.

"However, the introduction of a 35p rate will also benefit many ‘ordinary’ people who perhaps wouldn’t be expected to be paying higher rates of tax. For example, there are thousands of teachers, doctors and other public sector workers, especially in metropolitan areas, who are currently working under the 40% rate."

This is not the first time Ukip has been accused of offering tax cuts that would help the well-off most, after its "blue-collar platform" was panned as "windbaggery and spin".

See more on General Election 2015

Ukip had mooted moving where the 40p rate income tax kicks in to £45,000, and abolishing income tax for those on the minimum wage.

But former Treasury official James Meadway, now senior economist at the New Economics Foundation, said the proposals would be a "social catastrophe" if implemented.

"Moving the top rate threshold up will clearly benefit those at the top: for comparison, if you earn over £45,000 a year, you’re in the top 11% of earners. So they will be the only ones benefitting from this," he said.

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