Britain's tax system is 'unfair and must be revised'

It says that Chancellor Philip Hammond should use next month’s Budget to reform the tax system, as it has become too complex because of successive bolt-on changes. ­

Royal London director of policy Steve Webb said these have created anomalies, which mean that millionaires get to keep more than half of each extra pound that they earn, while those who are not among the super rich, can lose up to 70 per cent.

Royal London says that 775,000 people, from parents where one partner earns between £50,000 to £60,000, to those with a taxable income between £150,000 and £210,000, will pay more than those earning seven figures.

Webb said: “There are hundreds of thousands of people who pay more tax on each extra pound that they earn than a millionaire, in some cases losing 60p or 70p in the pound.

“It is hard to believe that this is a sensible way to run a tax system.

“The Chancellor should look to rationalise the tax system so that it is simpler, fairer and easier to understand.”

As it stands, the amount of tax people pay on the extra pounds they earn steadily rises as incomes do.

Those that earn under £11,000 pay no tax, those receiving up to £45,000 pay 20p in the pound, while people that earn up to £150,000 have to pay 40p.

Higher incomes are taxed at 45p in the pound.

He said those on seven-figure wages effectively pay 47 per cent on every extra pound they earn, (45p tax band and 2p national insurance).

That compares to 375,000 parents who effectively are taxed 59.9 per cent, due to NI contributions and reduced child benefit.