Britain relies on just 1M top earners for £124bn in income tax

Britain is relying on just 1.13 million top-rate taxpayers to raise £124bn in income tax this year. The concentration of revenue on high earners raises concerns over Labour’s tax strategy ahead of the budget. Read more: Britain relies on just 1M top earners for £124bn in income tax

Oct 14, 2024 - 21:00

Britain relies on just 1M top earners for £124bn in income tax

Sir Keir Starmer is set to present Labour's investment agenda to global financial leaders at a conference in early October, aiming to attract tens of billions in foreign capital.

New data reveals that the UK is increasingly reliant on a small number of top-rate taxpayers to generate a significant portion of its income tax revenue.

According to HM Revenue and Customs (HMRC), the 1.13 million individuals paying the 45p rate are expected to contribute £124 billion this year, which represents more than 40% of all income tax collected by the Treasury.

This figure surpasses the total revenue generated by corporation tax, fuel duties, council tax, and business rates combined. By comparison, the 29.5 million basic-rate taxpayers will contribute £82.8 billion, or 28% of income tax revenues, while 6.3 million higher-rate taxpayers will pay £93.7 billion, or 31%.

Labour’s Rachel Reeves is facing pressure to reassess her planned tax increases on non-doms and higher earners after Treasury officials warned that targeting a small group of top earners could yield less revenue than anticipated. Carl Emmerson, deputy director of the Institute for Fiscal Studies (IFS), cautioned that heavily taxing a small group of individuals could prompt changes in their behaviour, making it a “riskier strategy.”

With income tax generating £300 billion for the government this year, Sir Keir Starmer has emphasised that those with the “broadest shoulders” must bear the heaviest burden as Labour prepares for a “painful” budget on October 30.