Reform UK leader vows to lift income tax from overtime pay for anyone earning under £75,000, a policy he says will reward graft, lift productivity and put more than £1,000 a year back into the pockets of nurses, police officers and factory hands.
Nigel Farage has fired the starting gun on what is shaping up to be the most consequential domestic tax debate of the parliament, pledging to abolish income tax on overtime hours for the bulk of the British workforce should Reform UK win the next general election.
Under the proposal, unveiled in a Telegraph column timed to coincide with the Makerfield by-election campaign, employees on salaries below £75,000 who work beyond a 40-hour week would keep every penny of their additional pay. The party has badged it the “hard work bonus” and put the cost at around £5bn a year.
For Business Matters readers running payroll, the policy lands somewhere between a productivity opportunity and an administrative headache. It also marks Mr Farage’s most pointed move yet to recast Reform as the natural home of the working voter — territory Labour has long taken as its own.
A direct strike at Burnham’s Labour
The timing is no accident. Survation’s constituency poll on Saturday put Labour on 43 per cent in Makerfield against Reform’s 40 per cent, a wafer-thin margin in a seat Andy Burnham is fighting in the hope of using a Westminster perch to challenge Sir Keir Starmer for the Labour leadership.
Mr Burnham’s pitch, a £35bn land value tax paired with a £39bn social care levy, has handed Reform a clean line of attack. Mr Farage, writing in The Telegraph, accused Labour of being “more on the side of welfare” than workers, and argued that ordinary families were being “dragged into higher tax bands with nothing to show for it”.
The policy also bears the unmistakable fingerprints of Donald Trump’s “no tax on tips” pledge, a populist tax cut aimed squarely at the workers Labour assumes will vote for it by reflex.
What it would mean in the workplace
Reform’s worked examples are deliberately granular. A nurse on a 40-hour contract at the Royal Albert Edward Infirmary working six extra hours of overtime each week would, the party claims, take home an additional £5 an hour and be more than £1,300 better off across a year. Workers on the line at the local Heinz factory would gain more than £1,000.
That is a meaningful sum in a constituency where average earnings have lagged the national figure for the better part of a decade, and it speaks to the broader frustration with fiscal drag that has seen more professionals question the value of earning more as frozen thresholds pull them into ever-higher tax bands.
For SME owners, the implications are double-edged. A genuine “hard work bonus” could ease recruitment in sectors where overtime is the difference between covering a shift and turning custom away, hospitality, logistics, social care, construction. Office for National Statistics data on average hours worked by industry already shows healthcare and construction running well above the national mean on weekly hours, and a tax-free top-up could materially shift the labour supply equation.
The flipside is administrative. Reform concedes that anti-avoidance rules will need to be drafted to stop employers reclassifying ordinary hours as overtime, a temptation that will fall hardest on smaller firms without payroll departments. Amendments to the Working Time Regulations, a piece of retained EU law, would also be required.
The fiscal credibility test
This is Mr Farage’s first major tax announcement since October, when he scrapped his £90bn package of cuts in a deliberate move to harden Reform’s fiscal image, a turn already covered by Business Matters in our analysis of the party’s revised manifesto promising seven million workers would pay no income tax.
Reform says the £5bn cost would come out of £40bn in annual savings, ending welfare entitlement for foreign nationals, capping foreign aid at £1bn, axing net zero schemes, removing personal independence payments for non-serious anxiety conditions and trimming Civil Service back-office headcount.
Not everyone is convinced. Helen Miller, director of the Institute for Fiscal Studies, has called the proposal “problematic in principle and practice”, questioning why a tax break should be aimed at employees already clocking 40 hours a week. The behavioural risk — that workers and employers simply restructure existing pay arrangements to qualify, is one HMRC will need to plan for from day one.
There is also context worth noting for British employers. The UK has just seen the largest employer-side tax rise in the developed world on the back of the OECD’s recent labour cost data, a backdrop that has sharpened the appetite for any policy that puts cash back into the take-home pay column without obviously hitting business.
The political read
Polling by More in Common suggests a Burnham-led Labour would beat Reform 30 per cent to 27 per cent in a general election, within the margin, but tighter than the figures Sir Keir is currently posting. Wes Streeting’s pitch this week for a wealth tax, including aligning capital gains tax with income tax to raise £12bn, has further muddied Labour’s message on aspiration.
Into that confusion, Mr Farage has dropped a policy that is easy to explain, easy to cost on the back of a payslip and aimed squarely at the kind of voter neither of the legacy parties can now take for granted.
Whether the Treasury would ever sign it off is another matter entirely. But as a piece of political positioning four weeks out from a by-election Reform was already favoured to win, it is the cleanest piece of retail politics Mr Farage has produced in this cycle.
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Farage promises tax-free overtime in £5bn pitch to working Britain