Proportion of individuals reporting various average tax rates by total income category (2010-11)
|£100k to £150k||£150k to £250k||£250k to £500k||£500k to £1m||£1m to £5m||£5m to £10m||Over £10m|
|Average tax rates|
|30% to 40%||67%||77%||18%||11%||10%||8%||12%|
|20% to 30%||24%||13%||5%||4%||5%||4%||8%|
|10% to 20%||8%||3%||2%||2%||2%||3%||3%|
HM Treasury spokesman: “There are currently millionaires paying a lower tax rate than ordinary taxpayers. This is the system we have at the moment, but the Government is committed to making it fairer. We’re capping benefits and these figures clearly show why it’s fair to cap tax reliefs for the wealthy as well.”
The Treasury table above includes only Income Tax not Capital Gains Tax nor National Insurance
The Treasury table shows average tax rate across all income, not marginal rate.
The 50% tax rate on incomes over £150,000 began in 2010/11.
I have worked out the percentage in Income Tax and NI due on these levels of taxable income if no avoidance was undertaken. So these are the rates that 'should' be paid.
Full tax on taxable income of
|Source: Paul Lewis using UK Tax Tool 2012 app and uktaxcalculators.co.uk|
You will see that the percentage of income paid in tax is very different if it is solely from dividends. The rows in the Treasury table where people could be said to be avoiding tax are the bottom three. The top row are paying about their full whack and row four may or may not be depending on dividend/earnings ratio.
The numbers of individual taxpayers in the various bands - calculated by me from the Treasury figures - are shown in Table 3 below
These figures show there are 8,600 people with incomes of £100,000 or more paying less than 10% tax and 31,200 paying 10% to 20%. They cannot be paying the full rate of tax on all their income.
Another 99,100 paying 20% to 30% are unlikely to be paying tax on all their income.
The 348,300 paying 30% to 40% and the 90,000 paying above 40% are likely to be paying tax on almost all or all their income depending on the proportion of dividends and earnings in their income.
The Budget papers showed capping several tax reliefs at 25% of income or £50,000 whichever the higher would save the Treasury £490m in 2014/15, £240m in 2015/16 and £300m in 2016/17. Treasury Secretary David Gauke said on 16 April on Today on Radio 4 that the charity tax relief would account for "£50m-£100m" of the 2016/17 saving.
The Treasury wouldn't be drawn on what change the cap would make on the percentages of taxpayers paying various rates, but told me "The cap should mean people move up the rows."