Having promised not to raise taxes on “working people’’,[1] the government is widely expected to raise taxes on higher earners to pay for increased public spending. This comes as the UK is already set to lose more than 500,000, or 17 per cent, of its millionaires by 2028, one of only two developed economies where the number is expected to fall.[2] With fewer higher earners, who currently pay a large portion of income tax, the burden will be passed to those further down the income scale who can least afford it.
This note examines the share of income tax paid by top earners relative to their share of total income using data from HMRC.[3]
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Key findings
- In 2024-25, the top one per cent of income tax payers earned 13.3 per cent of total income and paid 28.2 per cent of income tax. This is up from 22.7 per cent in 2005-06, a full 20 financial years ago.
- This means the top one per cent of income tax earners paid 2.1 times their share of income taxes in 2024-25, up from 1.9 times two decades ago.
- The top ten per cent of income tax payers earned 35.1 per cent of total income in 2024-25 and paid 60.2 per cent of income tax, up from 52.9 per cent in 2005-06.
- 35.6 per cent of the adult population paid no income tax at all in 2023-24.[4]
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[1] Labour Party, Change – Labour Party Manifesto, 10 June 2024, p.21.
[2] UBS, Global Wealth Report 2024, 10 July 2024, p.30.
[3] HM Revenue & Customs, Shares of total Income Tax liability, 27 June 2024, www.gov.uk/government/statistics/shares-of-total-income-before-and-after-tax-and-income-tax-for-percentile-groups, (accessed 4 October 2024)
[4] Institute for Fiscal Studies, Share of adult population paying income tax by age bracket, 10 June 2024, ifs.org.uk/data-items/share-adult-population-paying-income-tax-age-bracket, (accessed 4 October 2024).