The rich, the poor and the middle pay a lot of tax
Apr 2012 16

There are some very misleading headlines around today in response to HMRC income tax receipts data which the Government has released to support its capping of unlimited reliefs.  The Metro reports that it shows “multi-millionaires hand over less than cleaners” as 6 per cent of those earning more than £10 million a year paid less than that in tax, and asks: “The richest pay how much tax?”  The answer to that question is: “a lot”.

Using HMRC data, we’ve replicated a graph produced in the United States by the blog Political Math. It shows just how much the rich are paying, and how it is a much larger share of total income taxes than their income, the rich certainly aren’t paying less than the cleaners.

click to embiggen

Some people on high incomes do pay less than you would expect in a given year, sometimes even very low figures like under 10 per cent of their income, but that’s because of specific reliefs, including those the Government is planning to cap. Unfortunately some of these reliefs exist to avoid very ugly results.  Limiting them, as another sticking plaster applied to the existing tax system, will end badly.

Two are particularly important: loss relief and relief on charitable contributions.  Lots of charities have been telling us about the consequences if tax relief for charitable contributions is abolished.  Loss relief is important too.

Suppose you make a £15 million loss one year, then enjoy a £15 million income the next year.  How much have you made overall?  £0.  If you get full loss relief then you will be taxed on that basis and pay nothing, as you have no income to pay from.  If your loss relief is capped at 25 per cent of your income, as the Government seems to be proposing, then you presumably have to pay tax on over £10 million.  From an income of £0.  Good luck.

The rich do pay a lot of income tax, the graph shows that clearly enough. That doesn’t mean those on low and middle incomes don’t as well, though.  Consumption taxes like VAT and alcohol and tobacco duties hit the poor harder, as a share of their income, and make up for the fact they don’t pay much income tax.  The middle class are somewhere in between.

Everyone is paying a fortune in tax.  It still isn’t enough and the Government is running a huge deficit. Cuts in spending are needed to fix the public finances and so that everyone can keep a little more of their money in their own pockets, to spend supporting their own families and their own causes.

Matthew was the Chief Executive of the TaxPayers' Alliance, author of Let Them Eat Carbon and editor of How to Cut Public Spending (and still win an election)

  • Vir Cantium

    “… you presumably have to pay over £10 million in tax”

    I assume that should read “to pay tax on over £10 million”! Excellent point though.

    • Matthew Sinclair

      Good point, thanks.  Edited the post.

  • TomPapworth

    This diagram is long overdue. For too long we’ve heard people discuss the left and right columns but not the middle column: headlines say “The top 1% pay 27.7% of tax” but don’t say whether they take home more or less than 27.7% of earnings – the crucial ingredient.

    What this shows is that our income tax system is highly progressive: only the top 10% of earners pay a proportion of income tax higher than their share of earnings.

  • Robert Shaw

    It would be very interesting to see the income bands associated with Coloumn 1.

  • Peter the Dutchman

    It would be most interesting to put actual income figures to the income percentages listed on the left hand side of your graph. How can I relate my own situation to ‘median’ or ‘median to bottom’?

  • Ronald Hibbert

    Today we have given 10 billion to the IMF, why when we are broke?
    I have sent this next comment to all major parties in Bury. -Why have British Taxpayers paid over a billion pounds for foreigners from all over the world to have free health, then go back home. The British people do not have any human rights. People come here because we are a soft touch. Lets face it this government and the last government gives our money away, spend the money made here,here. Charity begins at home.

    • Briankidd Deal

      Robert you are absolutely right. The NHS are owed over £500 million at anyone time from other countries nationals getting treated here.I also here that the EU want an increase of 6.5% in their budget next year. It already costs the UK £50 million a day and for what!

    • tinamac

      I agree that the british people have unequal human rights, but I really hate problems being blamed on foreigners. The inequality begins at home;
      I have relatives who are millionaires and relatives who are on state benefits, I am somewhere in the middle, aiming for rich please! My problem is with my aquaintances,  friends and relatives (not a small number of people) who are treated in the press and by politicians e.g. clegg, as the, “poor” or the “vulnerable”, or the “un educated” – they have had the same education and opportunities as the rest of my family and relatives – we all share the same background, the difference is, they are quite happy to sit around taking hand outs and they are quite adept at saying and doing the “right things” to maintain their very cushy position. One of them has been unemployed for 35 years! That adds up to a lot of money. They are quite fond of saying they couldn’t possibly do this or that job because it is beneath them or not paid enough or they can’t see themselves “working five days, nine to five in a dead end job like you sheep”.
      I think people should be made to work for their benefits (even many who say they have disabilities), keeping them busy, like the working population, so they don’t have so much liessure time would be the quickest way to get them finding alternative work for themselves. To put icing on the cake, all my so called poor relatives get free computers, free school trips, free school meals etc. this is a disincentive to work for a long time when you are starting out – I had to make the decision to “miss out” on these for my children when we were starting out and now I am better off, my children decided not to go to uni because they didn’t want to burden us as they can’t get the assistance that our relatives who never bothered doing anything can get – it’s all mad.
      If I applied for accommodation in the beautiful gypsy site in the rural location near me, I would be turned down, why? Because the sites are exclusively for the use of gypsies – in a modern britain, how can this be? Also, social housing has been built in my area that is detached with car ports and all kinds of energy saving features – most of the people housed in them are not working – what incentive will their children have to even bother to look for a job when it takes working people life times to get housing of this cost and they will find it difficult to afford so they will see it is in their interest not to work. The working people in near by houses have to park on the roads and can’t even get building permits for home improvement (never mind car ports) without paying a tax.
      How can one section of people take precedence over another? Because the UK is a very unequal society!

      • pa

        i will work for my benefits and my council tax and free rent and work for below NMW sign me up

  • Bryan Photographer

    Let’s not pretend that the Government is only stealing an excessive amount of money from our salaries in the form of taxation.
    A  good example of legalised theft is that a ‘duty’ is added to the price of petrol or diesel, and, here’s the cheat, VAT is added to this on top. A tax on a tax – now tell me, is that stealing?
    Recently disgruntled Cornwall, are, quite rightly, complaining about the proposed addition of VAT to hot Cornish pasties (also those sold elsewhere, Devon etc). The ‘Prime’ Minister has said that, since, for example, VAT is charged on Fish & Chips, it is only fair to do the same to a Cornish Pasty. Well, what about making it ‘Fair’ for us taxpayers, and REMOVE the tax from take-away Fish & Chips, then PM, go back and hide in in your Fagin’s Den.

  • Ben

    Yes but the rich on your graph doesn’t include the people who live here, work here, but for tax purposes live somewhere else or perform tricks like that of Mr Green. This data is for “tax payers only”, super rich non-taxpayers are excluded giving you this false data.

    As always the TPA is quick to the press release with a flawed evaluation of the data.

  • derekemery

    I suspect the public would prefer cuts over tax increases. There will have to be cuts eventually if GDP growth is low for the next 5 years  as some institutions are predicting.  The ever-towering debt will mean losing the AAA rating in a long term low growth economy.
    New Labour had to assume GDP growth figures of over 3% to make its debt liabilities work. What figure are the coalition assuming to make their debt liabilities work?

  • Jim

    As best I can find via wikipedia (, 90% of individuals have a gross income of less than  £45K. Ergo those top 10% who are paying over 50% of all income taxes include not only the super rich, but also the merely wealthy, and many of the ‘squeezed’ middle classes – doctors, dentists, solicitors, higher management grades, small business owners  etc etc. Those 10% oare paying more than the other 90% combined. A system that could hardly be described as not ‘progressive’.

  • Brian kidd Deal

    We all know that “Statistics” can be made to mean anything you want them to mean. We all pay far too much ta that is certain. The state have been shafting us all for years.
     It seems to me how ever you want to cut it that we are paying more and getting less regardless whether its local or central government. The waste will go on because it is in the interest of those  in such organisations to keep it that way.
      The current crop of intellectual pygmies haven’t got a clue or the vision and courage to do what is needed. God help us all.!

  • Ronald Hibbert

    Ron, Yes the country is full of tax dodgers, but we can save much more, start with – 800 in the house of lords, each costing over £130,000 a year; after Professor Winston there’s only a handful should be there, just brush away the ermine. STOP fighting other people’s wars. STOP spending billions on people who come to the UK for free heath care. SEND back every rioter who was not born here. STOP borrowing money and then giving it away. Do what France and Italy do, help smash the human rights bill, it doesn’t work for us locals. Do what I’ve done find, out what your MEP has done for your Town, if you dig deep enough you’ll find it’s a big fat ZERO.  

  • pa

    I am asking you to voice my objections to the new bedroom tax imposed by this un-elected goverment and making un-just laws which will affect the poor people by any goverment who are there to look after them not to tax them to despair. People who live in two or three bedroom properties who will have to pay for extra rooms not occupied is wrong the goverment is targeting the poor, they are only there to help them. People living in these houses have made them their home and have spent a considerable amount of money maintaining the house by decorating, installing, kitchens, bathrooms, carpets, fencing, driveways the garden. These and many other things all costing a lot of money and putting a lot of themselves into the house. There is also the neighbor-hood they have become a part of the familiarity of the surroundings where they have lived for quite some time. This at an age where some people it will have adverse affects on the mental/psychological effects, which will come upon them. Extra worries of how to pay for new things as stated above at an age and time where money is limited, mainly because they are on some kind of benefit and also will find it hard to find a job because of their age and the reality of the job market. People who will now feel there is no point in spending money on the house they live in and making it into a home. As one day they will have to leave because they will be taxed to live in a house seen as, just as a temporary residence. This goverment or any goverment have not got the right to play with people’s lives and mental states. Using this and past goverments failures on its housing. They have failed in building new houses to cater for the people which have increased from natural growth and immigration. The goverment have seen poor people living in a property, (which they are entitled to) by a goverment elected by them to provide their right to a home as an easy target. This is outrageous. It is their home and should not have the housing benefit reduced and slowly but surely force them out by getting into arrears. When finally they leave where do they go how do they pay for new things what happens to all the work they have spent on their house money or love what happens to the community they belong to? The goverment are destroying people because they are poor and have no job or on a benefit. Make the rich pay as they have trillions not like the poor on pennies. I would be very grateful if you can take time in to forwarding this to the relevant people. As I feel it is very important to protect the poor. The goverment have gone above themselves and need to be brought down. The public should decide public servants should listen. They know exactly what they are doing by forcing them from their home which is illegal. To pay money/tax from their benefit which is their money they are entitled to, to pay for food and pay utilities ie water, food, gas and electric not for rent.
    There is many more things which I have missed but generally this sums up the government is wrong they either do not care or have not thought about all the implications which will arise from this new tax. Some people will disagree and say why should you live in a house to big and tax- payers should not have to pay. This is the goverment’s tactics of fooling the general public that people on benefits are ripping tthe tax-payer off when this is not the case. The goverment are playing with people’s attitudes and way of thinking for their political gains at the expense of the poor and needy with a lot of these people through no fault of thier own have to be on benefits which is theirs. The goverment should not force people out of their homes it’s as simple as that. All goverments act like they are roman emperors this needs to be stopped.