Who REALLY pays all the income tax in the UK
This is a gift for the Ayn Randists: the UK is disproportionately and increasingly reliant on high earners for its income tax take.
New figures from HMRC show that the top 1% of UK taxpayers account for nearly 27% of the UK's total income tax take.
They also show that the top 5% account for 45% of the UK's total income tax take and that the top 25% account for 72% of the total.
What do you have to earn to be classified in the top 1%? The last personal income figures, from 2007-2008, suggest anything more than 149k will do it.
To fall into the top 5% of taxpayers you'll need to earn more than 61.5k. To fall into the top 25%, you'll only need to earn 29.5k+.
Here's how many people earn 150k+
A separate table shows that the UK has 275,000 taxpayers earning more than 150k and 13,000 earning more than 1m. A disproportionate number (138,000) earn between 200k and 500k.
So, are you over-taxed?
Does this mean front office bankers are over-taxed?
Maybe. The average UK income tax bill is just 5.3k, whereas the average bill for persons earning 200-500k is 109k.
Moreover, the average income tax rate for people earning up to 50k is 22.3%, whereas the average income tax rate for people earning more than 1m is 44.5%.
In a progressive tax system, this is, however, to be expected.
And it's worth bearing in mind that people earning between just 18.5k and 29.5k are bearing 17% of the total income tax burden.
Equally, however, big earners are contributing more UK income tax than ever before. In 1999, people earning more than 150k contributed just 21% of the tax take.
Today, investment banks' 'tax efficient compensation schemes' are crumbling (witness the demise of schemes at Deutsche and JPMorgan). The UK's tax regime is no longer avoidable and high earners are being forced to face up to the increasingly progressive reality.
This is right and proper, but the TUC might want to look at the existing tax contribution of high earners before calling for additional corporation taxes to be levied on bonuses too.
