Reform UK urges scrapping tax on overtime pay for lower earners
Reform UK calls for the abolition of income tax on overtime hours beyond a 40-hour workweek for employees earning under £75,000. The proposal aims to boost productivity and reward workers taking on extra shifts.
LONDON — A radical proposal to scrap income tax on overtime hours for lower- and middle-income earners was unveiled today by Reform UK, the right-leaning political party. The plan targets workers earning less than £75,000 annually, exempting overtime pay from tax once a 40-hour workweek threshold is exceeded.
Key Points
- ✅ Tax exemption applies only to overtime hours beyond 40 per week
- ⚡ Workers earning under £75,000 qualify for the relief
- 💡 Designed to incentivize productivity during labor shortages
The policy shift, announced by Reform UK leader Nigel Farage, argues that current tax rules penalize employees who take on extra shifts, particularly in sectors like healthcare, logistics, and manufacturing where overtime is common. Farage stated, “People should not be punished for working harder. This change would put money back in workers’ pockets and help fill critical labor gaps.”
Under current UK tax law, all income—including overtime—is taxed progressively, with higher earners facing a 45% marginal rate on earnings over £125,140. Reform UK’s proposal would create a two-tier system for overtime, applying no tax to hours worked beyond 40 in a week for qualifying employees.
| Income Bracket | Current Tax on Overtime | Proposed Tax on Overtime |
|---|---|---|
| Under £12,570 | 0% | 0% (no change) |
| £12,571 – £50,270 | 20% | 20% on first 40 hours; 0% beyond |
| £50,271 – £75,000 | 40% | 40% on first 40 hours; 0% beyond |
The proposal has drawn immediate criticism from Treasury officials, who argue that the policy could cost the exchequer up to £2.8 billion annually in lost revenue. A Treasury spokesperson said, “Tax policy must balance incentives with fiscal responsibility. We are reviewing the proposal to assess its economic implications.”
💡 Pro Tip
Employers should prepare for potential payroll system adjustments if this policy progresses, as overtime calculations would need to be tracked separately under the new rules.
Reform UK’s plan is not the first to target overtime taxation. In 2021, the European Union considered similar measures to address labor shortages post-pandemic, though no binding policy was adopted. The UK’s proposal, however, is the most ambitious in scope, applying to all qualifying workers regardless of sector.
📋 By The Numbers
- 40 hours — Weekly threshold before overtime tax exemption applies
- £2.8 billion — Estimated annual revenue loss to the Treasury under the plan
- 6.2 million — UK workers earning between £12,571 and £75,000 who could benefit
Trade unions have mixed reactions. The Trades Union Congress (TUC) called the proposal “short-sighted,” arguing that it fails to address fundamental issues like stagnant wages and insecure work. “Tax breaks for overtime do not create better jobs,” said TUC General Secretary Paul Nowak. “They simply reward employers for overworking staff.”
In contrast, business groups like the Confederation of British Industry (CBI) cautiously welcomed the idea, emphasizing its potential to improve workforce participation. “Any measure that encourages flexible working and rewards effort should be given serious consideration,” a CBI spokesperson noted.
Reform UK’s proposal comes ahead of a potential general election, positioning the party as a champion of working-class interests. Farage framed the issue as a moral one: “This is about fairness. People who put in the extra hours should keep more of what they earn.”