Raymond Doherty 25 Jun 2019 12:08pm

Johnson's tax plan expensive and benefits wealthy

Boris Johnson’s two flagship tax proposals would cost the Treasury billions per year and would mainly benefit the UK’s top 10% of earners, according to the Institute for Fiscal Studies (IFS)

The overwhelming favourite to be Britain’s next prime minister has proposed increasing the income tax higher rate threshold (HRT) from £50,000 to £80,000, and to raise the point at which people start paying National Insurance Contributions (NICs).

The HRT increase would cost about £9bn and benefit the four million or so income tax payers with the highest incomes, according to the think tank’s analysis. The top 10% would gain around £2,500 a year and the biggest beneficiaries will be high income pensioners.

The raise of HRT to would also “constitute a major change to our income tax system” by taking about 2.5 million people out of higher rate tax – reducing the number of higher rate taxpayers to its lowest level since 1990.

Tom Waters, IFS research economist and an author of this analysis said, “These are expensive pledges to cut tax. Raising the [HRT] as far as £80,000 would be a radical change benefiting high income households only, though it is important to be aware that the numbers paying higher rate tax have crept up over time, largely unannounced.

“There are now more than four million higher rate taxpayers compared with 1.5 million 30 years ago. Raising the floor for NICs helps low earners, though raising tax credits would be much more effective and better targeted if that were the key aim. These pledges between them will cost many billions of pounds. It is not clear that spending such sums on tax cuts is compatible with both ending austerity in public spending and prudent management of the public finances,” he added.

The IFS said that raising the NIC floor is “expensive”, costing around £3bn a year for each £1,000 that it is raised.