The government has raised fears over who will be hit by tax rises in the Budget this week as it struggles to define ‘working people.’
Prime Minister Keir Starmer has previously warned that the Budget will be “painful” as Chancellor Rachel Reeves claims tax rises are needed to fill spending gaps left by the Tories.
Starmer has promised not to increase taxes on working people, citing general election manifesto pledges not to increase income tax, employee national insurance (NI) and VAT.
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But employer NI is rumoured to be set for a rise, which could hit staff when it comes to wages.
Capital gains and inheritance tax are also rumoured to be candidates for reform, but many working people will own investments and pass on assets.
This has contributed to Starmer’s struggle to define what he means by working people.
What is a working person?
The Oxford and Cambridge dictionaries both define a working person as someone with a job.
That is a pretty generic definition and the modern workplace is made up of freelancers, the self-employed, full and part-time workers as well as those who work from home and the office.
Starmer told Sky News last week that he wouldn’t include those whose sole income derived from assets, such as shares or property in his definition, which could mean capital gains tax rises for landlords and investors.
He later clarified that he defines working people as those without the “ability to write a cheque when they get into trouble.”
In recent days, the definition among Labour ministers and the Prime Minister has shifted to “protecting the payslips of working people,” which may mean bad news for the self-employed who are typically paid in dividends and take less regular income.
Dariusz Karpowicz, director at Albion Financial Advice, says modern working life isn't as black and white as politicians would like it to be.
“Many hardworking people combine traditional employment with asset-based income to make ends meet or plan for their future. It's not about how you earn, but rather the effort and dedication you put into managing your income streams,” he says.
“This oversimplified definition feels more like political theatrics than a meaningful contribution to the conversation about work and wealth in modern Britain.”
Is Starmer's definition of working people fair?
We won’t know what Starmer really means by working people until the Budget this week.
But Holly Mackay, founder of investment comparison website Boring Money, warns it is unfair to suggest that working people don’t own shares or property.
She says: “It reinforces an old-fashioned narrative which I’ve spent my working life trying to dispel. Namely that shares are only for posh tweed-wearing landowners.”
Mackay highlights that over the past five years, the number of DIY investment accounts in the UK has shot up from around 5.2 million to 10.6 million.
Around one in three adults today own some sort of investment product, not including a workplace pension, she says.
Landlords are also insisting that they are working people.
The National Residential Landlords Association (NRLA) has cited data from the English Private Landlords Survey, which showed 30% are employed full-time, with a further 10% working part-time.
Another 28% are self-employed in some way, while 35% are retired and are likely to rely on their rental income for their pension.
Ben Beadle, chief executive of the NRLA, adds: “Rather than stoking misconceptions, the government needs to focus instead on the key challenge in the rental market, namely a lack of homes to rent to meet ever growing demand.”
