Income Tax (Paid Fair)

LIFE will consolidate Income Tax and National Insurance into a single Income Tax, paid by everyone on all earnings. That’s what we call Paid Fair.

Income Tax Rate Setting

The “Base Rate” and a “Step Up Rate” for the following year will be declared by the government in the Budget for the following tax year. All income below the national median income will be subject to the Base Rate of Income Tax. The Step Up Rate will be added to the Base Rate for each multiple of the median income. For instance: if the “Base Rate” is set at 30% and the “Step Up Rate” is set at 5%, then income between the median and twice the median will be subject to a rate of 35%, and income between twice and four times the median subject to a rate of 40%, and income between four and eight times the median subject to a rate of 45%, and so on.

The maximum marginal rate of Income Tax will never exceed 50%.

Other Changes

The following are the other significant changes to the structure of Income Tax:

• All worldwide income received by a UK citizen or a UK resident, and UK income received by a foreign resident, will be subject to Income Tax (subject to Double Taxation treaties). Earned wages, unearned income, capital gains and inheritance will all count the same.
• There will be no allowances. (To provide a transition for those earning less than the National Median Income, the existing personal allowance will be tapered – reduced by 20%/year over 5 years.)
• Each individual will be assessed for taxes separately.
• The tax year will be changed to a calendar year effective January 1st 2017.

Tax Bands

This is the Income Tax band table based on 2012/13 median income data, the actual bands will be adjusted each year to reflect the then current median income.

* Initially for those earning less than the National Median Income, the Start Band will be set to the current personal allowance, and then reduced by 20%/year, becoming £0 after 5 years.

Modelling of the impact of these tax bands on current incomes show that LIFE Income Tax is progressive: 80% taxes are paid by the top half of earners, only 20% of total Income Taxes are levied on those at or below the median income.

Budget Revenues

The UK Budget page has the numbers on revenues.