Conservative backbench MPs are calling for the 40p tax threshold to be raised to £50,000 with future increases in the limit linked to wages.
Tory MPs Kwasi Kwarteng and Priti Patel will today publish a report, Motivating the Middle, warning of the impact of fiscal drag caused by the previous and present Government’s income tax policies on middle earners.
The 40p tax threshold is set to fall to £41,450 next April, from its current £42,475 level, to ensure higher-rate taxpayers do not benefit from an increase in the personal allowance from £8,105 to £9,205.
Speaking to the Mail on Sunday, Kwarteng said: “When Lloyd George brought in his ‘supertax’ in 1909, it was only paid by those on around the equivalent of £500,000 a year. Now the higher rate of 40 per cent income tax is increasingly paid by those in the middle class.
“In 2011, 3.7 million taxpayers paid the higher 40p rate of tax. By 2014, five million will.”
Kwarteng and Patel says the Government should be raising tax thresholds proportionately with earnings.
“We should increase the tax thresholds – the rate at which you start paying higher taxes – in line with wages. We should aim for a target of taking everyone earning less than £50,000 out of paying the higher rate of 40 per cent. This is not only fairer – it will help encourage hard work and enterprise.”