Freddie van Mierlo MP raises concerns over £100,000 tax trap in Parliament

Freddie van Mierlo, MP for Henley and Thame, has raised concerns in Parliament about the impact of the so called “£100,000 tax trap”, warning that it discourages work, limits reinvestment in the economy and unfairly penalises families.

During a recent exchange in Parliament, Freddie asked the Chancellor what steps the Government is taking to address the issue. Under the current system, people earning over £100,000 begin to lose their personal tax free allowance.

Freddie highlighted that once income tax, the withdrawal of the personal allowance and student loan repayments are taken into account, some workers can face marginal rates as high as 71 percent. In some cases, families with children can also lose eligibility for support such as childcare when crossing income thresholds, meaning some parents can actually be worse off by earning more. The threshold for losing childcare support has not moved since 2017 when it was introduced despite high inflation.

The number of people earning more than £100,000 has steadily risen and is expected to reach 2.3 million by the end of the parliament in 2029.

Freddie van Mierlo MP said:

“The £100,000 tax trap creates a cliff edge that can leave families tens of thousands of pounds worse off from earning more. More and more people tell me this is an issue for them, and instead of spending their earnings in the economy now, they either work less, or put money into salary sacrifice pension schemes to stay eligible for childcare.

It may seem like an issue only for higher earners, but it holds down ambition impacting the whole economy. Even if you don’t have children, for people with a student loan the marginal tax rates can reach as high as 71 percent. If you’re getting just 29p in your pocket on every £1 earned it’s easy to see why many people will say, that’s just not worth my while.

That’s why I raised this directly with the Chancellor, but it was dismissed as a non-issue. I appreciate that the majority of people don’t earn such high salaries, but my residents are coming to me with this issue and sadly the government is dodging their concerns.”