To: Chancellor of the Exchequer
Peg the Universal Credit rate of reduction to the top rate of income tax
The rate at which Universal Credit is reduced when the claimant is in paid work has recently been lowered from 63 pence in the pound to 55 pence in the pound. However, this constitutes a marginal tax rate for people on low incomes far above what is paid in income tax by the highest earners; the top rate of tax is currently 45%. Therefore HM Government should introduce legislation to anchor the rate of Universal Credit reduction to the top rate of tax and either reduce the UC rate to 45% or raise the top rate of income tax to 55%.
Why is this important?
It is a glaring anomaly that those who earn the national living wage or just above it should be faced with losing over half their Universal Credit whilst those earning over £100,000 per annum pay income tax of only 45%. Using legislation to match these two figures would provide some equity in the tax and benefits system.