Some rough calculations of basic income costs (UK), you can edit figures with a little pencil icon beside them. Hover over numbers or click the cog icon to see how a number has been calculated.
Target income (per month): £
= annual £.
Proportion of this for children 0.5 = £ per month.
Paid for by various interventions (see below) and increase in tax rate of %
Note the current single person Universal Credit is £409.89 (gov.uk) and pension is £ (gov.uk)
Summary impact:
Net cost to public purse (with interventions below): £ billion.
Gain for tax payer at median income: £
Gain at income of £: £
Interventions
Let’s assume the following interventions:
- remove personal income tax allowance (currently )
- remove National Insurance lower limit (currently , source GOV.UK)
- remove National Insurance upper limit (which currently drops from 12% to 2% for higher earners; currently , source GOV.UK)
- increase income tax universally by %
Impact
We’ll calculate impact at four levels
- minimum wage at 37 hour week; currently (source ACAS)
- median wage; currently £ (source ONS)
- top of basic rate tax; currently £ (source GOV.UK)
- high earner £100,000 – top 3% of tax payers (source GOV.UK)
Total cost
There are approximate 38 million people of working age in the country, plus approximately 12 million pensioners and 14 million under 18 (from Pension Policy Institute and Statista).
The basic income would substitute directly for some of the state pension, therefore there is no additional cost for those above retirement age.
Even before Covid the UK welfare budget was over £260 billion (see DWP and ONS summaries). About half of this is in the form of pensions or other support for those above retirement age. Of the rest, there are a number of benefits that might need to continue with a smaller basic income such as housing benefit. This leaves around £110 billion that would be replaced by a universal basic income.
Total cost for working age population: £ billion
Total cost for children: £ billion.
Net cost after deducting welfare savings: £ billion.
Paying for it
According to Survey of Personal Incomes Table 2.1 Number of individual Income Tax payers, there are 26.9 million standard rate (20%) tax payers, 4.2 million higher rate (40%) payers and 0.48 million on the additional rate (45%). That is million taxpayers in total.
Table 2.6 Income Tax liabilities, by taxpayer’s marginal rate gives the total amount of tax paid by each group at approximately 60 billion each (B, B, B), with effective tax rates of %, % and 37.7%
Removal of allowances and limits
Removal of NI lower limit (universal): £ billion.
Removal of NI upper limit (affects higher paid): £ billion.
Removal of personal tax allowance (doesn’t affect highest paid): £ billion.
Total due to removing limits: £ billion.
Additional income tax due to increased rate
Additional % rate of income tax (universal)
Standard rate tax payers: £ billion.
Standard rate tax payers: £ billion.
Additional rate tax payers: £ billion.
Total due to increased tax rate: £ billion.
Balance for the public purse
Additional cost: £ billion.
Income due to removal of limits: £ billion.
Income due to higher tax rate: £ billion.
Overall additional cost to the public purse: £ billion.