Reform UK has unveiled a policy to eliminate income tax on overtime pay, framing the proposal as a direct attempt to increase take-home pay for lower and middle-income workers and reshape incentives around extra hours of work.

The plan, described by the party as a “Hard Work Bonus,” would apply to employees earning under £75,000 annually who work beyond a standard 40-hour week, effectively making overtime earnings tax-free under a future Reform government.

The proposal is designed to target what the party describes as structural disincentives in the UK tax system, arguing that workers who take on additional shifts do not see sufficient reward after taxation.

Under the plan, overtime pay would be exempt from income tax while normal earnings would continue to be taxed under existing rules.

Reform estimates the measure could affect around three million workers, including nurses, tradespeople, and warehouse employees who regularly work additional hours.

Politically, the policy forms part of a broader Reform UK strategy focused on taxation, public sector reform, and labour market deregulation.

The party has positioned itself as an alternative to both Labour and Conservative approaches, arguing that current economic policy has failed to reward work sufficiently.

Party leaders have presented the overtime tax exemption as a way to make additional hours more financially attractive while also boosting productivity in sectors reliant on shift work.

The fiscal implications are central to the debate.

The proposal would reduce income tax receipts from overtime earnings, with funding intended to be offset through unspecified savings in public spending and broader efficiency reforms.

Critics of Reform’s wider economic platform have repeatedly argued that similar pledges lack detailed costings and rely on assumptions about future savings, raising questions about how such measures would be sustained without either increasing borrowing or cutting existing services.

Supporters of the plan argue it would increase labour supply, particularly in essential services and manual industries where overtime is common.

They claim workers would be more willing to take additional shifts if the marginal return were higher, potentially easing staffing pressures in sectors facing shortages.

Opponents, however, warn that the policy could distort hiring incentives, encourage excessive reliance on overtime instead of new recruitment, and complicate payroll systems by creating a separate tax category for part of an employee’s income.

The proposal also raises administrative and behavioural questions.

Defining overtime, verifying hours worked beyond a standard threshold, and preventing reclassification of regular pay as overtime would require detailed enforcement rules.

Economists and tax specialists have previously warned that similar targeted exemptions can create opportunities for avoidance unless tightly regulated.

At present, the policy remains a political commitment rather than enacted legislation.

Its implementation would depend on Reform UK forming a government and passing enabling tax legislation through Parliament.

The announcement adds to the party’s wider programme of tax and structural reforms, which it argues are aimed at increasing the financial reward for work while reducing the complexity of the tax system.