The first week of Andy Burnham’s premiership has seen him announce initiatives to help alleviate the cost of living crisis.
Many fear he is likely to bring back the 50p top rate of income tax, although this would break a manifesto commitment and Burnham’s team has played it down. FT consumer editor Claer Barrett explains.
British Prime Minister Andy Burnham has left open the possibility of raising taxes on the country’s highest earners, reviving debate over whether the United Kingdom could return to a 50% top rate of income tax.
The proposal has not yet become official government policy. However, Burnham has previously argued that there is a case for restoring the 50p rate, while his government faces pressure to finance public services, defence spending and measures addressing the cost of living.
Any increase would be politically contentious. Labour’s 2024 manifesto explicitly promised not to raise the basic, higher or additional rates of income tax. Reintroducing the 50% rate could therefore be portrayed as breaking that commitment—unless the government attempted to create a separate tax band applying only to exceptionally high incomes.
How the current system works
For the 2026–27 tax year, the additional income tax rate in England, Wales and Northern Ireland is 45% on taxable income above £125,140. People earning more than £100,000 also gradually lose their personal allowance, producing an effective marginal income-tax rate of 60% on part of their earnings.
Scotland operates a separate system. Its top rate is already 48% on income above £125,140, meaning a UK-wide debate over a 50p rate would have different implications across the country.
A rise from 45% to 50% would affect only income exceeding the chosen threshold. It would not mean that an individual’s entire salary was taxed at 50%.
For example, if the existing £125,140 threshold were retained, a taxpayer earning £200,000 would pay the extra five percentage points only on the portion above that threshold. Before considering other deductions or behavioural changes, this would represent approximately £3,743 in additional annual income tax.
Britain has tried a 50p rate before
The United Kingdom introduced a 50% additional rate in April 2010 for annual income above £150,000. The measure remained in force for three tax years before being reduced to 45% in April 2013.
Its financial impact remains disputed.
Supporters argue that people with the greatest ability to pay should make a larger contribution toward public services. They also contend that a higher top rate would signal greater fairness when many households continue to face pressure from housing, energy and food costs.
Critics point to the relatively limited revenue attributed to the previous 50p rate. High earners were able to change the timing or form of their income, increase pension contributions or adopt other tax-planning strategies. Some income was brought forward before the rate took effect and deferred until after it was reduced, making its underlying yield difficult to calculate.
Analysis by the Institute for Fiscal Studies concluded that the available evidence did not establish that the earlier 50p rate produced large additional receipts. This historical uncertainty remains central to the present debate.
How much money could it raise?
Estimates reported by the Financial Times suggest that restoring the 50% additional rate might raise approximately £600 million annually. That would provide additional revenue, but it would be relatively modest compared with the scale of total UK government spending.
The final amount would depend on several choices:
- the income threshold at which the rate began;
- whether it covered all forms of taxable income;
- how taxpayers changed their behaviour;
- the effectiveness of tax enforcement;
- whether highly paid individuals remained resident in the UK.
The lower the threshold, the greater the number of affected taxpayers—and the greater the political and economic consequences.
A government could instead introduce a new 50% band at a much higher level, such as £200,000 or £250,000. This might allow Burnham to argue that the existing “additional rate” had not technically been increased. Nevertheless, opponents would probably regard that distinction as an attempt to bypass Labour’s manifesto commitment.
The economic arguments
Supporters of a 50p rate see it as part of a broader effort to rebalance the tax system. Burnham has previously suggested that earnings are taxed too heavily relative to wealth. A higher rate on the best-paid workers could be combined with changes to capital-gains, property or wealth taxation.
The measure would also have symbolic importance. Asking those with the highest incomes to contribute more could strengthen public acceptance of difficult fiscal decisions elsewhere.
However, opponents warn that increasing the top rate could make the UK less attractive to senior executives, entrepreneurs and internationally mobile professionals. It could also encourage people to convert income into capital gains, reduce their taxable earnings or move abroad.
The central question is therefore not simply how much tax is charged, but how much taxable income remains after individuals respond to the change.
Would Burnham break Labour’s tax pledge?
Labour’s 2024 manifesto stated that the party would not increase National Insurance, VAT or the basic, higher and additional rates of income tax.
Burnham has indicated that his government intends to respect the manifesto, but he has also spoken about the need for fairer taxation and the possibility that people may have to contribute “a little more” to meet the country’s spending requirements.
Restoring the previous 50% rate directly would be difficult to reconcile with the manifesto’s wording. Creating an entirely new band for ultra-high earners might offer a technical distinction, but it would still expose the government to accusations of breaking the spirit of its promise.
What happens next?
No return to the 50p rate has been formally announced. The government’s intentions are more likely to become clear when the Treasury presents its next Budget.
Until then, the proposal should be treated as a policy under consideration rather than a confirmed tax change. Burnham must balance pressure from Labour supporters seeking a more progressive system against concerns about investment, competitiveness and the credibility of the party’s election commitments.
The debate ultimately comes down to two questions: whether a 50p rate would be seen as fair, and whether it would raise enough revenue to justify its political and economic costs.
Sources
- UK government: Current income-tax rates and allowances
- Reuters: How Andy Burnham’s government might raise taxes
- Financial Times: How Burnham could pay for his plans
- Institute for Fiscal Studies: Evidence on the former 50p rate
- Labour Party: 2024 manifesto
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