Liam Field is a writer and Conservative Party member with an MSc in Philosophy and Public Policy from the LSE.
The Conservative Party claims to champion hard work and ambition. Britain’s tax system punishes both.
After 14 years of government we shoulder much of the blame for this contradiction, but fixing it is how we win back the strivers who should be our natural supporters. Here are three examples of the system failing strivers at every income level, and three reforms that could fix it.
First, a single earner family, the kind making headlines for turning down promotions because of tax traps. An NHS manager earning £65,000 a year while their partner cares for their three children full-time. Their employer, recognizing their excellent work, offers a promotion with a £5,000 pay rise.
After 40 per cent income tax, 2 per cent National Insurance, and the High Income Child Benefit Charge (HICBC) taking 25 per cent of their Child Benefit, they keep £2,126 of that £5,000. For a family supporting three children, that’s barely £40 a week. We’ve built a system that punishes the ambition that we claim to reward.
Next, a single parent of two children doing skilled part-time work for £18,000 a year, while receiving Universal Credit. Her employer needs more of her time, and offers her additional hours worth £5,000.
After 20 per cent income tax and 12 per cent National Insurance, she has £3,400 net. Universal Credit withdraws 55 per cent of that: £1,870. She keeps £1,530 of the £5,000 raise: £127 a month for six extra hours every week. That’s an effective hourly rate of £5.30, less than half the minimum wage. The Universal Credit taper turns skilled work into poverty wages.
Finally, what Britain calls a high earner: a professional on £99,000 with three children. After a successful appraisal, her employer awards her a £5,000 bonus.
Above £100,000, you lose £1 of personal allowance for every £2 earned, creating an effective 60 per cent tax rate. You also become ineligible for Tax-Free Childcare worth £2,000 per child. After £3,000 in income tax and £100 in National Insurance, she keeps £1,900 of her bonus – but loses £6,000 in childcare support. She’s £4,100 worse off than if she’d never received the bonus. That’s not a typo: a £5,000 reward costs her £4,100.
And that’s just Tax-Free Childcare. Cross £100,000 and you also lose 30 hours of free childcare per week, worth roughly £12,000 a year per child. For three children under five, that’s £36,000 a year. Our professional would need to earn close to £170,000 before she’s better off. Progression becomes financially impossible. This isn’t a marginal rate. It’s a ceiling.
These three examples reveal the system’s priorities. We’ve designed a tax system where progression is punished, where earning more can leave you poorer, where ambition becomes financially irrational. But workers aren’t just a cost to be taxed. They are the economy. Their effort creates value, their spending drives demand, their progression generates productivity. A system that confiscates 60-100 per cent of marginal earnings from working families sabotages growth and betrays the people Conservatives claim to champion.
Three reforms could dismantle these traps, and begin our renewal as the party of strivers. First, remove the high-earner cliff-edges: the £100k personal allowance cliff, the High Income Child Benefit Charge, and the Tax-Free Childcare income limit. These arbitrary thresholds create absurd outcomes, like our professional who becomes £4,100 worse off from a £5,000 bonus. They punish exactly the ambition and progression Conservatives claim to champion. Remove them, and families face normal marginal rates instead of confiscatory ones.
Second, substantially increase the Universal Credit work allowance – the amount families can earn before benefits start to taper. Eliminating the 55 per cent taper entirely would be prohibitively expensive, but we can reduce how many families it affects by raising the threshold where it begins. Our single parent would keep meaningfully more when taking on extra hours: still not perfect, but turning a £5.30/hour effective wage back toward something that rewards effort. This is the hardest trap to fix completely, but we can make tangible progress.
Third, index all tax and benefit thresholds to inflation automatically. The higher rate threshold has been frozen since 2021, dragging more workers into 40 per cent tax every year. The personal allowance hasn’t kept pace with inflation, meaning the tax-free amount shrinks in real terms. Fiscal drag turns reasonable tax bands into stealth tax rises. Index everything, and the system stays where we design it instead of punishing more families through the back door.
These reforms would cost roughly £11-13bn. They would lead to substantial productivity and growth increases, but we’ve learnt the lesson of uncosted tax reforms.
We could defray the cost by bringing capital gains tax into closer alignment with income tax. We tax wages in the high 40s while taxing capital gains at 20 per cent. There are reasons for this gap, but the balance has gone too far. What does it say when we tax effort harder than inheritance? When the mechanic pays more on his overtime than the landlord on his rent?
Moving CGT rates closer to income tax rates for higher earners would raise substantial revenue toward these reforms, while reinforcing that earned income shouldn’t face harsher taxation than unearned wealth.
These reforms won’t solve everything overnight. The UC taper remains imperfect, and deeper questions about the balance between work and wealth need answering. But we can dismantle the worst traps that make progression financially irrational.
Remove the handbrake. Stop punishing ambition. Trust that if we let people keep more of what they earn, they’ll create the growth Britain desperately needs.
This is how Conservatives win back the strivers who should be our natural supporters: by finally meaning what we’ve always said about work, aspiration, and reward. The party of hard work needs policies that actually back hard workers. This is where we start.
Liam Field is a writer and Conservative Party member with an MSc in Philosophy and Public Policy from the LSE.
The Conservative Party claims to champion hard work and ambition. Britain’s tax system punishes both.
After 14 years of government we shoulder much of the blame for this contradiction, but fixing it is how we win back the strivers who should be our natural supporters. Here are three examples of the system failing strivers at every income level, and three reforms that could fix it.
First, a single earner family, the kind making headlines for turning down promotions because of tax traps. An NHS manager earning £65,000 a year while their partner cares for their three children full-time. Their employer, recognizing their excellent work, offers a promotion with a £5,000 pay rise.
After 40 per cent income tax, 2 per cent National Insurance, and the High Income Child Benefit Charge (HICBC) taking 25 per cent of their Child Benefit, they keep £2,126 of that £5,000. For a family supporting three children, that’s barely £40 a week. We’ve built a system that punishes the ambition that we claim to reward.
Next, a single parent of two children doing skilled part-time work for £18,000 a year, while receiving Universal Credit. Her employer needs more of her time, and offers her additional hours worth £5,000.
After 20 per cent income tax and 12 per cent National Insurance, she has £3,400 net. Universal Credit withdraws 55 per cent of that: £1,870. She keeps £1,530 of the £5,000 raise: £127 a month for six extra hours every week. That’s an effective hourly rate of £5.30, less than half the minimum wage. The Universal Credit taper turns skilled work into poverty wages.
Finally, what Britain calls a high earner: a professional on £99,000 with three children. After a successful appraisal, her employer awards her a £5,000 bonus.
Above £100,000, you lose £1 of personal allowance for every £2 earned, creating an effective 60 per cent tax rate. You also become ineligible for Tax-Free Childcare worth £2,000 per child. After £3,000 in income tax and £100 in National Insurance, she keeps £1,900 of her bonus – but loses £6,000 in childcare support. She’s £4,100 worse off than if she’d never received the bonus. That’s not a typo: a £5,000 reward costs her £4,100.
And that’s just Tax-Free Childcare. Cross £100,000 and you also lose 30 hours of free childcare per week, worth roughly £12,000 a year per child. For three children under five, that’s £36,000 a year. Our professional would need to earn close to £170,000 before she’s better off. Progression becomes financially impossible. This isn’t a marginal rate. It’s a ceiling.
These three examples reveal the system’s priorities. We’ve designed a tax system where progression is punished, where earning more can leave you poorer, where ambition becomes financially irrational. But workers aren’t just a cost to be taxed. They are the economy. Their effort creates value, their spending drives demand, their progression generates productivity. A system that confiscates 60-100 per cent of marginal earnings from working families sabotages growth and betrays the people Conservatives claim to champion.
Three reforms could dismantle these traps, and begin our renewal as the party of strivers. First, remove the high-earner cliff-edges: the £100k personal allowance cliff, the High Income Child Benefit Charge, and the Tax-Free Childcare income limit. These arbitrary thresholds create absurd outcomes, like our professional who becomes £4,100 worse off from a £5,000 bonus. They punish exactly the ambition and progression Conservatives claim to champion. Remove them, and families face normal marginal rates instead of confiscatory ones.
Second, substantially increase the Universal Credit work allowance – the amount families can earn before benefits start to taper. Eliminating the 55 per cent taper entirely would be prohibitively expensive, but we can reduce how many families it affects by raising the threshold where it begins. Our single parent would keep meaningfully more when taking on extra hours: still not perfect, but turning a £5.30/hour effective wage back toward something that rewards effort. This is the hardest trap to fix completely, but we can make tangible progress.
Third, index all tax and benefit thresholds to inflation automatically. The higher rate threshold has been frozen since 2021, dragging more workers into 40 per cent tax every year. The personal allowance hasn’t kept pace with inflation, meaning the tax-free amount shrinks in real terms. Fiscal drag turns reasonable tax bands into stealth tax rises. Index everything, and the system stays where we design it instead of punishing more families through the back door.
These reforms would cost roughly £11-13bn. They would lead to substantial productivity and growth increases, but we’ve learnt the lesson of uncosted tax reforms.
We could defray the cost by bringing capital gains tax into closer alignment with income tax. We tax wages in the high 40s while taxing capital gains at 20 per cent. There are reasons for this gap, but the balance has gone too far. What does it say when we tax effort harder than inheritance? When the mechanic pays more on his overtime than the landlord on his rent?
Moving CGT rates closer to income tax rates for higher earners would raise substantial revenue toward these reforms, while reinforcing that earned income shouldn’t face harsher taxation than unearned wealth.
These reforms won’t solve everything overnight. The UC taper remains imperfect, and deeper questions about the balance between work and wealth need answering. But we can dismantle the worst traps that make progression financially irrational.
Remove the handbrake. Stop punishing ambition. Trust that if we let people keep more of what they earn, they’ll create the growth Britain desperately needs.
This is how Conservatives win back the strivers who should be our natural supporters: by finally meaning what we’ve always said about work, aspiration, and reward. The party of hard work needs policies that actually back hard workers. This is where we start.