Top-rate tax could be cut to 40% in return for forfeiting relief

A policy proposal will be submitted by Shadow Treasury chief secretary Angela Eagle to cut the top rate of tax to 40 per cent in exchange for the removal of all allowances.

At the Labour conference in Liverpool last week, Tax Research UK founder Richard Murphy suggested those earning over £150,000 should pay 40 per cent tax instead of 50 per cent but forfeit all allowances and reliefs.

Murphy said: “We need to remove all allowances and reliefs for those earning over £150,000 in the UK and then we could not bother with the 50 per cent, we could cut it to 40 per cent.”

Speaking to Money Marketing, Murphy said the idea has not been fully costed, but he believes it will bring in more money from taxpayers. He said: “The move would definitely result in a higher tax take and would also very likely mean we could cut the taxes of the 90 per cent of taxpayers this does not affect.”

Eagle said she would submit the proposal to the policy review, which is expected to publish results by next year’s Labour conference.