Introduce a Progressive Income Tax System

Manifesto 1.0 proposes replacing the existing combination of Income Tax and employee National Insurance with a clearer progressive system of personal taxation.

Proposal 02 set out the case for abolishing employee National Insurance. Proposal 03 explains the other side of that reform: employment income would continue to be taxed, but through a single progressive Income Tax structure.

1. The proposition

Manifesto 1.0 proposes the following marginal Income Tax structure:

Employee National Insurance would be abolished as a separate deduction.

The objective is to move away from taxing employment through two major deductions — Income Tax and employee NI — and towards one clearer progressive system.

2. These are marginal rates

The proposed percentages are marginal tax rates.

Someone earning £250,001 would not pay 49% tax on their entire income. Instead, each portion of their earnings would be taxed at the rate applying to that particular band.

Under the proposed structure:

• the first £40,000 would fall within the 33% band;
• income between £40,001 and £50,000 would fall within the 40% band;
• income between £50,001 and £150,000 would fall within the 45% band;
• income between £150,001 and £250,000 would fall within the 47.5% band; and
• only income above £250,000 would fall within the 49% band.

3. How this connects to Proposal 02

Proposal 02 proposed abolishing employee National Insurance.

That naturally raises an important question:

Manifesto 1.0 does not treat NI abolition as a stand-alone giveaway.

Instead, employee NI would cease to exist as a separate tax and employment income would be brought within the proposed progressive Income Tax structure.

The proposed Income Tax rates are therefore higher than current headline Income Tax rates in part because the comparison should no longer be made against Income Tax alone.

The two proposals are designed to sit side by side.

4. A fairer contribution

Manifesto 1.0 starts from the principle that everybody who benefits from a functioning society should make a reasonable contribution according to their means.

The proposed system therefore asks those with the greatest incomes to contribute a greater proportion at the margin while retaining a broad tax base.

It is deliberately progressive without proposing punitive headline rates.

The highest proposed marginal rate is 49%, applying only to income above £250,000.

The objective is not to punish success, enterprise or ambition.

It is to create a system in which contribution rises progressively with the ability to contribute.

5. How the Universal Standard Income changes the picture

The proposed Income Tax rates cannot properly be considered in isolation from Proposal 01: the Universal Standard Income.

The USI would begin at £4,000 per year and rise progressively over ten years towards an initial benchmark of £12,570, subject to fiscal sustainability.

As the USI rises, the conventional Personal Allowance would progressively reduce by the value of the USI.

At the full year-ten structure envisaged by Manifesto 1.0, an eligible individual would:

• receive a £12,570 USI;
• have no conventional Personal Allowance;
• pay no employee National Insurance; and
• pay progressive Income Tax from the first pound earned.

6. Reforming the Personal Allowance

Under Manifesto 1.0, the conventional Personal Allowance would reduce pound-for-pound as the Universal Standard Income rises.

At the starting USI of £4,000, an individual would therefore retain a Personal Allowance of £8,570.

As the USI progressively increases, the Personal Allowance progressively decreases.

At the intended £12,570 USI benchmark, the conventional Personal Allowance would reach zero.

The individual would therefore receive the £12,570 directly through the USI rather than receiving the same amount indirectly as a tax-free allowance.

This transition is another reason why the proposed Income Tax rates should not be compared with today’s headline rates in isolation.

The relevant comparison is the individual’s overall position after Income Tax, abolished employee National Insurance, the remaining Personal Allowance and USI received are considered together.

7. Where does the money come from?

Manifesto 1.0 proposes a wider financing architecture rather than relying upon a single tax change.

• Progressive Income Tax — the proposed 33%, 40%, 45%, 47.5% and 49% marginal structure.
• Personal Allowance reform — the conventional allowance progressively reduces as the USI rises.
• Employee NI replacement — employee National Insurance disappears as a separate deduction, with employment taxation instead operating through the unified Income Tax system.
• Welfare consolidation — as the USI develops, it would progressively replace overlapping elements of working-age income support.
• Employment growth — more people in employment should mean more Income Tax and consumption receipts alongside lower welfare expenditure.
• Economic growth — a larger economy should expand the underlying tax base.

The system would therefore be phased and adjusted according to actual economic and fiscal performance.

8. Simplicity and transparency

One purpose of the reform is to make personal taxation easier to understand.

At present, an employee can see Income Tax deducted from their earnings while also paying employee National Insurance through a separate system.

Manifesto 1.0 asks whether it is clearer simply to tell people what their marginal tax rate is.

One principal progressive tax on earnings should make it easier for workers to understand:

• what they earn;
• what they contribute;
• why they contribute it; and
• what they receive through the wider settlement.

Transparency is itself an important part of tax reform.

9. What this proposal is — and what it is not

It is a proposal for a new progressive system of personal Income Tax.

It is designed to operate alongside the abolition of employee National Insurance.

It is integrated with the Universal Standard Income and reform of the Personal Allowance.

It is not a claim that abolishing employee NI costs nothing.

It is not a claim that the proposed Income Tax rates have already been proven to replace every pound of lost National Insurance revenue.

It is not an OBR-certified tax model.

Manifesto 1.0 contains working estimates. A government seeking to implement the proposal would require detailed HM Treasury and HMRC modelling covering individual earnings, employment effects, behavioural responses, avoidance, benefit interactions and the overall distributional impact.

The purpose of Manifesto 1.0 is to put a defined proposition on the table that can be tested, challenged and improved.

Key figures at a glance