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IFS: Millions more to drift into 40p income tax band by 2030

The Institute of Fiscal Studies director Paul Johnson is predicting at least half of all basic rate taxpayers will pay 40p income tax over the next 15 years as millions more drift into the higher rate band.

Speaking at a fringe event on taxation at the Labour party conference in Brighton yesterday, Johnson also predicted big changes in the way pensioners are taxed national insurance in the next decade.

The influential thinktank says Government is reluctant to embark on radical tax simplification because of fears major changes would reduce the amount of tax collected.

The income tax personal allowance will rise to £10,000 next April and the Liberal Democrats want it to increase to £12,500 over the next parliament.

Responding to a question on what he expects to be the big tax changes by 2030, Johnson said: “We may have a basic rate of tax of 40p because we have been moving in that direction for the last 20 years because the personal allowance is going up and the level people pay 40p is going down so the 20p basic rate is being squeezed.

“We will either have a basic rate of 40p or we will have as many people paying the 40p rate as 20p, it’s gone up from 1 million 10 years ago to 4 million today. That is one very big change which is happening unnoticed and it is likely to carry on.

“I think there will also be a change in the way pensioners are taxed, particularly for national insurance contributions.”

Johnson also predicting huge reductions in the tax take from petrol as the UK seeks to meet green targets and believes it could pave the way for a national congestion charge by 2030.

Shadow exchequer secretary Catherine McKinnell predicted greater transparency in the tax system over the next decade as it seeks to keep pace with technological change. 

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  1. Our lying cheating masters in Westminster know this only too well. The spin and misinformation manufactured wholesale during the Blair years has taught all that have come after how to continue the calumny.

    If you look at average incomes since 2000 they have risen overall by a paltry 50.6% BUT the personal allowance for the basic rate tax band has increased by an even worse 21% – less than half!
    The Great British Public (GBP) fondly believes that they have a basic rate of 20% – not even that is true. Add NI and you are nearer to 30%. But of course more and more are getting enveloped into the 40% band making a mockery of our so called low tax environment. Now add AE (after all it’s a tax) and the great bulk of the population will be paying 40% or more tax. In which case this will be the new basic. But of course the lying so and so’s in Westminster will bend over backwards to perpetrate the lie whilst diddling their tax free expenses like mad.

    In any other country there would have been a revolution.

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