Is MP Salary Tax Free?
MPs are not government employees, so they do not pay income tax under the head of salary. However, they are entitled to a tax rebate if they earn over a certain amount.
MP salaries are set by an independent body called the Independent Parliamentary Standards Authority. It is responsible for setting a range of allowances and pensions to support Members in their work. It was introduced in 2010 in response to the parliamentary expenses scandal and is also responsible for ensuring that Members do not exceed their allowances.
The main annual salary for a British MP is PS84,144 as of April 2022. There are also allowances for travel, housing and office costs.
Most MPs are eligible to claim an additional amount of income tax if they receive more than the annual basic salary from their constituency or London office. For example, some MPs are also paid a higher salary when they are appointed as ministers or chair select committees.
Some parliamentary allowances are exempt from tax under sections 10 and 21 of the income-tax act, while some others may be charged. These allowances include transport to and from the House of Commons and to Parliament itself, office equipment, postage paid envelopes and stationery, and other administrative costs.
Allowances for travelling and housing vary around the world. For example, a US Senator is given $500,000 per year for travel and lodging in Washington; a UK MP gets an allowance to rent a house in the UK or to stay in a hotel elsewhere.
Indian MPs, on the other hand, do not receive an allowance to rent a house, nor do they get office space or any other facilities to help them with their duties. They are allowed to hire legislative assistants, but they do not receive as much money for this as their counterparts in the United States and Britain.
In Kenya, a compromise was reached between the Salaries and Remuneration Commission (SRC) and MPs over their salary. MPs had originally been granted a lower salary of $75,000, but the SRC voted to raise it to 130 times the minimum wage in May. Analysts said the move was a win-win for both sides.
A review of MPs’ salaries and allowances is conducted every three years. This is a formal process under the Parliamentary Salaries and Allowances Act, which is administered by the Independent Parliamentary Standards Authority (IPSA).
IPSA makes the determination of MPs’ salary levels and sets the level of any rise in salary. It is required to consult the Speaker and the Minister for Ministerial Services and to invite any comments that MPs might have.
The determinations are published a few months after the end of an election. The Authority is required to publish an explanatory memorandum describing its approach.
MPs can choose to use a previous system of transitional allowances, pensions and salaries. This is still available for some MPs who were elected before 2009.
The SRC had ruled that MPs would be required to pay an additional tax of 45p a week on top of their standard rate of income tax if they earned more than PS150,000. It was estimated that 41 senior ministers could be affected if they were to pay this extra tax.