A centre-right think tank has called on Prime Minister Andy Burnham to consider raising the top rate of income tax to 52 per cent as part of a far-reaching overhaul of Britain’s tax and welfare system aimed at extending employment protections to the self-employed.
In a report published ahead of the Autumn Budget, Bright Blue argues that the UK’s tax system no longer reflects the realities of the modern labour market and proposes replacing employer National Insurance contributions with higher income tax rates.
Under the proposals, employer National Insurance would be abolished entirely, while National Insurance paid by self-employed workers would be aligned with employee rates. In return, around five million self-employed workers would gain access to benefits including automatic pension enrolment, statutory sick pay and parental leave.
The reforms would require significant changes to income tax. Bright Blue proposes increasing the basic rate from 20 per cent to 31 per cent, the higher rate from 40 per cent to 48 per cent and the additional rate from 45 per cent to 52 per cent. It also recommends introducing a new 13 per cent income tax band for earnings between £5,000 and the personal allowance threshold of £12,570.
The think tank argues that the changes would correct longstanding distortions in the tax system. According to its analysis, a self-employed worker earning £39,000 pays around £1,587 in National Insurance, while an employee on the same salary and their employer together contribute roughly £7,214. Bright Blue estimates the resulting gap costs the Exchequer around £10 billion annually.
The organisation also points to weaker financial security among the self-employed. They account for around 13 per cent of Britain’s workforce but often lack employment protections available to salaried workers. Pension participation is particularly low, with the Government’s Pensions Commission estimating that only four per cent of self-employed workers are saving for retirement.
Bartek Staniszewski, Bright Blue’s head of policy, said the current system was designed when lower taxes reflected significantly lower access to state support.
That settlement no longer reflects today’s labour market,” he said, arguing that a new deal was needed to provide stronger protections while creating a fairer tax system.
The proposals are likely to prove politically contentious. Supporters argue they would modernise employment protections and simplify taxation, while critics warn that sharply higher income tax rates—particularly a 52 per cent top rate—could deter investment, weaken incentives to work and encourage higher earners to relocate overseas.
The recommendations arrive as ministers prepare for the Budget on October 28, with tax reform expected to feature prominently in the Government’s fiscal strategy.
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