Shocking Report States half of British adults pay NO income tax

Experts have warned the UK is not 'all in this together' as new research shows a record number of people - 23 million people - now pay no income tax.

A study from the Institute of Fiscal Studies has revealed the number of UK adults paying no income tax has leapt to 43 per cent, up nearly ten percentage points in little over a decade.

By contrast the top one per cent - just over 300,000 earners - contribute 27 per cent of all income tax.

Policy analysts warned of a threat to the 'contributory principle' that citizens have to pay in to the public purse to receive services from the state, and said it meant fewer people pushing for low taxes or value for money from government spending, since they themselves would not be footing the bill. 

The group of adults who pay no income tax includes the unemployed and home-makers with no earnings, as well as retirees, and anyone who earns less than the tax free allowance. 

The population exempt from paying income tax has risen as the number of retirees has gone up, but mainly as a result of increases to the personal tax free allowance since the beginning of the Coalition government in 2010. 

Since 2007/8 the percentage of adults paying no income has risen from 34.5 per cent to 43 per cent.

And since 2010 the tax free threshold has been raised from £6,450 to £12,500.  

The director of Onward, a centre-right think tank which researches wages and wealth distribution, warned the figures ricked jeopardising the link between taxpayers and those who receive public services.

Will Tanner told MailOnline: 'While low income earners should always be prioritised the risk with a larger and larger proportion of voters not contributing is it erodes the principle that people have to pay in to get stuff out.

'We should be wary of undermining the contributory principle that underpins the link between tax raising and public spending.

'We should have a broad tax base in which people pay in towards public services and then take out when they need those services.

'A narrow tax base reduces the feeling that "we're all in this together" and we're all contributing to the state of public investment.' 

He said there were 'good arguments for' the increase in tax-free allowance, which is one of the most effective ways of reducing the tax burden on the least well-off. 

Daniel Pryor, Head of Programmes at the Adam Smith Institute, said: 'These statistics put to shame the idea that the rich aren't paying their fair share - in fact, top income earners pay the vast majority of tax in the UK.

'Income tax hurts investment, economic growth and innovation, and it's good that many Brits on lower wages are paying less.

'This does, however, create a worrying political issue: fewer people having a direct stake in pushing for lower taxes or getting value-for-money from government.' 

According to the latest data (from 2015/16) used by the IFS, the percentage of UK adults paying income tax is now 57.14, a number which is likely to have fallen further since 2016 as the tax free allowance has continued to rise. 

According to ONS figures compiled by the IFS, the last time only 57 per cent or less of the UK adult population paid tax was in financial year 1997/98. 

John O'Connell, chief executive of the TaxPayers' Alliance said: 'The decline in the number of adults who pay income tax is in large part because of more retirees, and the increase in the personal allowance. But too often we are forced to pay for other taxes which we might not even be aware of.

'From flights to petrol, insurance to fizzy drinks, the government takes a huge proportion of our income, even if your labour isn't taxed any more.

'National insurance and income tax should eventually be merged. This will simplify the system and ensure people are more aware of just how much HMRC extracts from them.'

The study also found it  takes a salary of more than £300,000 a year to be counted rich in London, and to be seen as one of the top earners in his peer group, a middle-aged man in the capital has to make £700,000 a year.

The scale of the salaries, bonuses and perks of the best-paid is 'staggering', the respected Institute for Fiscal Studies said, adding that its research showed 'the extraordinary scale of the gulf between the merely well off and the very richest'.

The £300,000 figure is the salary needed to be among the top one per cent of income tax payers in London, the IFS said.

It is almost twice as high as the £162,000 needed to join the one per cent of highest income tax payers across the rest of the country.

The figures were revealed in a major study of the wages of Britain's workforce based on parliamentary constituencies.  

The high pay gap is such that a member of the biggest earning group – a man aged between 45 and 54 – would be in the top one per cent in the country on £162,000, but that pay packet would put him outside the top five per cent in London.

To be in the top one per cent in the capital, he would need to make more than £700,000 a year.  

Researchers at IFS based their study on the self-assessment tax forms demanded by Revenue and Customs from anyone who earns more than £100,000 a year.

Their report said that, nationally, just over 300,000 people make enough to be in the top one per cent, and that they pay more than a quarter of all income tax.

There are only 30 constituencies where more than two per cent of people are in the one per cent club. More than half of those are in London or the south east, and that ultra-elite group includes only one constituency in the north - Aberdeen.

One in three of the top earners are business owners or partners in large concerns, the report said, and others are City workers such as hedge fund managers.

The top group also includes senior accountants and lawyers – one large accountancy business paid its partners on average more than £600,000 last year, and one London law firm pays £100,000 a year even to newly-qualified solicitors.

Medical professionals are also among the top one per cent, and the best-paid include GPs, some of whom are said to earn up to £700,000 a year.

The pay scales dwarf the salary paid to the Prime Minister, who can claim £158,754 a year. 

Report author Robert Joyce said: 'The highest-income people are very over-represented in the country's south east corner, most of them are men, and many are in their 40s and 50s.'

Women were less likely to be high earners, and someone on £100,000 a year can count herself in the top one per cent of high-paid women nationally.

That is a rise from 12 per cent in 2000, but falls again if you compare gender differences in the top 0.1 per cent of earners.

The study of the 650 parliamentary constituencies revealed only 30 where more than two per cent of adults are in the top one per cent of taxpayers.

The top five constituencies with the highest earners were all in London - Westminster, Kensington, Chelsea and Fulham, Richmond Park and Esher and Walton.

The bottom five were Liverpool Walton, Rhondda, Stoke-on-Trent Central, Birmingham Hodge Hill and Kingston upon Hull East.

1 view0 comments