Remove basic tax for NHS staff: calculation note

Central fiscal result

+£8.0bn - Net fiscal impact in 2027-28

Low case: +£4.0bn. High case: +£14.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Eligible frontline NHS and social-care workers pay no basic-rate income tax.
• The relief lasts three years.
• Higher-rate tax above the basic band remains.
• Eligibility is narrower than all health and care employment.

Affected population

• Affected units are employee taxpayers in NHS and social care.
• NHS England HCHS headcount is about 1.54m.
• Adult social care has about 1.60m filled posts in England.
• Low-paid workers below tax thresholds gain less.

Gross impact

• Central case assumes about 2m eligible taxpayers after exclusions.
• Average tax relief is around £4,000 per eligible worker.
• Central cost is £8bn.
• Retention savings are not fiscal-scored.

Fiscal build-up, central case

• Income tax receipts lost: +£8.2bn
• Higher hours and retention receipts: -£0.3bn
• Administration and payroll changes: +£0.1bn
• Administration and uncertainty: +£0.0bn

Central net impact: +£8.0bn in 2027-28.

Behaviour and pass-through

• Low case assumes narrow eligibility and some retention benefit.
• Central case assumes broad frontline coverage and limited offset.
• High case includes agency staff, devolved spillovers and classification pressure.
• Tax relief does not train new workers quickly.

Phasing

• 2026-27: +£2.0bn. Preparation or partial implementation.
• 2027-28: +£8.0bn. Main scenario year.
• 2028-29: +£8.5bn. Behaviour and pass-through develop.
• 2029-30: +£8.5bn. Steady-state uncertainty persists.

Main source groups

• Propper, Burgess and Gossage, "Competition and Quality: Evidence from the NHS" (Economic Journal, 2008): NHS incentives can affect quality, so workforce policy should consider service performance as well as headcount; relevant to retention claims, though not a direct tax-relief study.
• NHS Digital, "NHS Workforce Statistics, August 2025" (2025): NHS England HCHS staff numbered about 1.54 million headcount in August 2025; anchors tax-relief exposure.
• Skills for Care, "State of the adult social care workforce 2025" (2025): Adult social care in England had about 1.60 million filled posts in 2024-25; anchors care-worker exposure.
• Reform UK, "Our Contract with You" (2024): Used to define the pledge wording, policy scope and implementation scenario being modelled.
• HM Revenue and Customs, "Direct effects of illustrative tax changes" (2026): Used to support the baseline, affected-population sizing or behavioural assumptions in the illustrative scenario.
• Saez, Slemrod and Giertz, "The Elasticity of Taxable Income" (Journal of Economic Literature, 2012): Tax changes can affect reported earnings, hours and avoidance through multiple margins; supports caution on labour-supply claims from targeted tax relief.
• Reform UK, "Our Policies" (2026): Used to define the pledge wording, policy scope and implementation scenario being modelled.