The top 1% of UK taxpayers now contribute a third of income and capital gains tax
The top 1% of UK taxpayers pocketed a third of all income tax and capital gains tax (CGT) collected in the last financial year, according to new HMRC data which highlights the growing reliance on the highest income tax pool.
A freedom of information (FOI) request by the Investment Service Wealth Club found that the top 500,000 taxpayers paid in 2023.
The Wealth Club said the findings underscore the financial risks of dissuading high net worth individuals (HNWIS) from living and investing in the UK.
“A very small group of people are responsible for a large share of the country’s tax share,” said Alex Davies, founder and chief executive. “Instead of punishing success, we must create a stable and attractive environment where entrepreneurs and wealth producers choose to live, invest and contribute to the long-term success of the nation.”
The figures come amid the end of a non-domicile scheme in April to speed up the movement of the world’s super-rich. The previous regime allowed foreigners who have their permanent home abroad to pay an annual fee starting at $30,000 while protecting the income from UK tax.
Under the new rules, those who have been resident in the UK for four years or more must pay income and capital gains tax, and inheritance tax also applies to overseas assets.
Marc Acheson, a global wealth expert with Wealth Solutions, said: “Some say that raising more taxes is an easy fix, but it has been shown that this group will reduce income materially and can reduce income.”
He also added that the circle like Italy, Switzerland and Portugal are “fiercely competing” to attract non-doms and HNWIS.
“You can’t milk a cow that has left the belt”
Private client lawyers receive this warning. Ceri Vokes, head of private client and tax for Europe, said many wealthy people, especially business owners, were already moving following the non-tax liquidation, higher CGT changes and upcoming tax changes.
“You’re a rich person who was already in a part of the tax burden in the UK. By doing it yourself, you’re not just losing tax; you’re losing jobs, money and the opportunities they create,” he said. “You can’t milk a cow that has left the belt – yet that’s exactly what the super rich want to do.”
In response to the FOI findings, a Treasury spokesman said: “The UK’s tax system is improving, which means those on lower incomes are giving more, helping to support vital public services.”
However, with the top 1% now paying a third of wealth-related taxes, economists warn that the government faces a delicate balancing act between protecting the money paid to top leaders, entrepreneurs and investors.
With the budget due in November, policymakers will be under pressure to show that tax reforms can raise revenue and keep donors on whom the tax base depends.
