Reform UK's tax-benefit reform proposals

Reform UK leader Nigel Farage today confirmed four tax-benefit policy reforms would be included in the party's manifesto for the next general election in a speech in central London. The party had previously included three of these reforms in its 2024 general election manifesto, committing to:

• Increase the Personal Allowance from £12,570 to £20,000
• Increase the higher rate threshold from £50,270 to £70,000
• Raise the Marriage Allowance maximum rate from 10% to 25%

Today Farage confirmed that the party would include these reforms in the next general election manifesto, alongside a fourth commitment to repeal the two-child benefit cap on Universal Credit and Child Tax Credit payments. In the following sections, we summarise how these policies work today and quantify their impact using PolicyEngine's tax-benefit microsimulation model.

See how these reforms would affect your household here.

The government exempts the first £12,570 of an individual's income from income tax, known as the Personal Allowance. The personal allowance is gradually reduced for individuals earning over £100,000, with a complete withdrawal at £125,140. The government has frozen this threshold since 2021, and is scheduled to remain at this level until 2028.

The higher rate threshold is the income level at which individuals start paying the higher rate of income tax (40%). Currently, this threshold is set at £37,000 (it is added to the Personal Allowance, so the effective threshold is £50,270). The government has frozen this threshold since 2021, and is scheduled to remain at this level until 2028.

The Marriage Allowance permits couples to transfer 10% of any unused personal allowance between spouses when one earns below the Personal Allowance threshold and the other pays the basic rate.

The two-child limit removes the entitlement of children born after April 2017 to Universal Credit and Child Tax Credit child element payments, if they are the third or subsequent child in a family, unless exceptions apply.

PolicyEngine's model estimates that these reforms would cost £75 billion in 2025-26, rising to £78 billion in 2029-30. Over the five-year window from 2025-26 to 2029-30, the total cost of these reforms would be £391 billion. Table 1 below shows the estimated costs of each reform.

Table 1: Estimated revenue impacts of Reform UK's tax-benefit proposals (£ billion)

Policy	2025-26	2026-27	2027-28	2028-29	2029-30	2025-30
Repeal the two-child limit	-1.7	-1.8	-1.9	-2.2	-2.3	-9.9
Raise the Personal Allowance to £20,000	-50.7	-51.5	-52.4	-49.1	-45.5	-249.3
Set the higher rate threshold to £70,000	-22.2	-23.8	-25.5	-27.2	-29.3	-128
Raise the Marriage Allowance rate to 25%	-0.7	-0.7	-0.8	-0.8	-0.9	-3.9
Total	-75.3	-77.9	-80.5	-79.3	-78.1	-391.1

We also estimate that these reforms would benefit 82% of people in 2025, increase the Gini coefficient of income inequality by less than 0.1%, and reduce poverty (absolute before housing costs) by 8.6%. The reforms would raise the net incomes of households in the bottom decile by 1.3% and the top decile by 4.2%.

To view more results, visit the PolicyEngine UK microsimulation model and our household calculator for this suite of reforms.