Labour set to pledge income tax increase on salaries over £80,000

Labour has signalled it would raise income tax on salaries above £80,000, while claiming the Conservatives plan hikes for much lower earners.

Shadow Chancellor John McDonnell will attempt to outflank the Tories by unveiling what he is calling a “personal tax guarantee” of no increases for 95 per cent of taxpayers.

Labour has already said it would not raise VAT, but will now extend that promise to cover National Insurance contributions and income tax for people earning below £80,000 a year.

It is the strongest hint yet that the party’s manifesto will contain a pledge to increase the burden on earners above £80,000, whom Mr McDonnell has declared to be “rich”.

It comes as Labour makes an audacious bid to be “the party of low taxes” by ruling out increasing the National Insurance rate – which the Conservatives have refused to do.

Speaking in East London on Sunday, Mr McDonnell will say: “The choice at this election is very clear on tax, as there is currently only one party which is committing not to raise taxes on middle and low earners – and that is the Labour Party.

“If Labour is elected next month, we will guarantee that for the next five years there will be no tax rises for income taxpayers earning less than £80,000 a year, no hikes in VAT, and no changes in your National Insurance contributions either.”

Mr McDonnell will accuse Theresa May of choosing to “run and hide” whenever she is asked if she is planning to increase taxes, if re-elected.

The Prime Minister has ruled out a VAT hike, but her manifesto is expected to drop George Osborne’s guarantee of no rise in National Insurance contributions.

That would free the Conservatives to have another push at weakening the advantages enjoyed by the self-employed, which had to be abandoned in the Budget.

“The Labour Party is now the party of low taxes for middle and low earners, while the Tories are the party of tax handouts for the super-rich and big corporations,” Mr McDonnell will add.

“The Tories are hoping that the British people can be kept in the dark about what the tax increases they are planning will mean for those on middle and low incomes, who have had to bear the brunt of seven years of austerity.”

The announcement suggests Labour will, in its manifesto, pledge to restore the 50 per cent top rate of tax scrapped by Mr Osborne, who lowered it to 45p.

However, if introduced at earnings above £80,000 it would hit many more people than the original 50p rate, which only kicked in at £150,000.

The Liberal Democrats have been by far the boldest on income tax, vowing to slap 1p on all rates – currently 20p, 40p and 45p – to raise an extra £6bn a year for the NHS and social care.

Until now, Labour has concentrated on reversing corporation tax and capital gains tax cuts introduced by the Conservatives, to fund priorities including 10,000 more police officers.