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Is David Cameron really going to give each millionaire a £40,000 tax cut?



Reality check: Ed Miliband told the Labour conference today that the prime minister was about to write out a £40,000 cheque for every millionaire in Britain. But is he? Paul Owen checks it out
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Ed Miliband: 'Next April, Mr Cameron will give a tax cut of £40,000 to each and every millionaire in Britain. Not just for one year but for each and every year.' Photograph: Phil Noble/Reuters


In his party conference speech today, Ed Miliband said that next April the coalition government was going to introduce a "tax cut for millionaires".


What do the government choose as its priority? A tax cut for millionaires, a tax cut for millionaires. Next April, Mr Cameron will give a tax cut of £40,000 to each and every millionaire in Britain. Not just for one year but for each and every year. That is more than the average person earns in a year.

So is it true?

Miliband was referring to the cut in the top rate of tax from 50p in the pound to 45p, due to take effect in April next year.

After April 2013, anyone earning above £150,000 will pay 45p in the pound on their earnings above that point.

So they will save 5p for every pound earned above £150,000.

If you are earning £1m, in 2012-13 you will pay:

20% on the first £42,475 = £8,495
40% on £42,475-£150,000 = £43,010
and 50% on the remaining £850,000 = £425,000

That's a total of £476,505 to pay in tax. (You lose your personal allowance after your wages top £116,210.)

But in 2013-14 you will pay:

20% on the first £41,450 = £8,290
40% on £41,450-£150,000 = £43,420
and 45% on the remaining £850,000 = £382,500

That's a total of £434,210 to pay in tax, a saving of £42,295.

So people earning a million pounds a year will save £42,295 a year in tax due to the change to the top rate of tax.

But that wasn't what Miliband said. He said millionaires would save £40,000 a year. And clearly if you have a million pounds in the bank or under your mattress but you are only earning, say, £20,000 a year, you won't make any such savings.

So Miliband's claim is wrong. All millionaires will not get a tax cut of £40,000. But all those who earn £1m a year will.

Miliband also said that David Cameron was not just writing these £40,000 cheques, but would be receiving one too:


Here's the worst part. David Cameron isn't just writing the cheques. He's receiving them. He's the one getting the tax cut.

Is he? As prime minister, Cameron earns £142,500, putting him under the top rate tax band. However, it is not clear whether he has other earnings that would take him over the threshold.

At prime minister's question time last month, Miliband asked Cameron directly whether his earnings made him a top-rate taxpayer, and the PM refused to answer.

For Miliband's claim to make sense, Cameron would have to not just be in the top-rate bracket (ie earning more than £150,000) but earning more than £1m a year. But we can't know whether this is true unless the prime minister confirms or denies it. I called No 10 and they said they would not discuss an individual's tax arrangements.

Let me know your thoughts below.

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