Reform pledges to lift income and inheritance tax thresholds

Reform UK will on Monday say it would lift the thresholds for income and inheritance tax as the party unveils its economic strategy.

Reform claims the tax cuts could be funded by ending a stealth subsidy paid to high street banks at a cost to taxpayers of more than £25 billion.

Nigel Farage, the party’s leader, and Richard Tice, the chairman, will call for the income tax starting point to be lifted from £12,570 to £20,000, which they say will save every worker almost £1,500 a year.

The basic rate would stay at 20 per cent, but the point at which people would start paying the higher rate of 40 per cent would increase from £50,000 to £70,000.

This would be allied to the abolition of inheritance tax for estates worth under £2 million in a pledge that increases pressure on the Conservatives to promise their own changes.

The current threshold for inheritance tax is £325,000, although there are some exceptions for family homes. Reform is also proposing to reduce the rate at which the tax is applied, from the current 40 per cent level to 20 per cent.

In reality, the policy will not be implemented after the general election, given that Reform has no prospect of becoming the governing party.

The Conservatives have been attempting to win back voters tempted by Reform, a party to the Right of them, with policies including the return of national service.

But Mr Farage’s surprise decision to take over the Reform leadership and run as a candidate to be the Clacton MP is undercutting that drive, and the first poll since his return put Reform just two percentage points behind the Tories.

Reform will also go further than the Tories’ plan to get rid of stamp duty tax for first-time buyers of properties costing up to £425,000.

The party will propose that stamp duty should be scrapped for properties under £750,000 and reduced to two per cent for those from £750,000 to £1.5 million and four per cent for those over £1.5 million.

Reform will claim the cuts could be funded by scrapping a little known scheme whereby lenders receive interest payments on reserves – piles of cash – they have to hold at the Bank of England.

These reserves, which amount to more than £700 billion, came about mainly as a result of the Bank’s quantitative easing programme. Under QE, new money was conjured out of thin air in order to shore up the financial system following the 2008 credit crisis.

Commercial banks earned virtually no returns on this money when interest rates were low, but are now receiving interest of 5.25 per cent because the base rate has soared and QE is being unwound. As a result, almost £40 billion a year of interest payments are being channelled to the banks, inflating their profits.