Higher rate taxpayers contribute two-thirds of total UK tax
01 May 2014
Taxpayers liable to the 40p and 45p income tax rates will pay 67% of Britain’s total tax bill by 2014/15, even though they represent only 16% of the UK population, according to figures released by HMRC.
Under the Coalition Government over a million additional people have become liable to the higher and additional rates of income tax. In 2011/12 they paid 58% of the nation’s tax bill and contributed a total of £91.9 billion to the Treasury, compared to £172 billion today.
This effect, often called ‘fiscal drag’, has been lucrative for the exchequer but some Conservative MPs have expressed concern about the political consequences of failing to increase the 40p threshold. Traditionally, the earnings threshold at which people start paying higher rate tax – (currently £31,865) has been increased in line with inflation, but from April 2014 it will rise by a flat 1% for two years, bringing more middle-income earners into liability to the rate.
Tory backbencher John Redwood said: “Those dragged into the 40p rate are not rich people. It is wrong to impose a penalty rich person’s rate on a middle-earner and we have too many people paying the 40p rate. I think that cutting the top rate further will increase the amount of money that rich people pay. We can use this extra income to take people out of the 40p rate.”
The latest statistics also show that the top 1% of taxpayers earn 12.6% of the total UK income but contribute 27.4% of the total tax yield, while the top 5% earn 25.1% of the income but contribute 47.7% of the tax