The IFS used data from HMRC’s income tax records to examine the highest-income groups in the country, concluding that there is a marked discrepancy between region, gender, and age.
As the IFS notes, the gap between the top 1% and “the merely quite well-off” is stark. The median income taxpayer has a taxable income of £22,000 a year.
The top 1% of income tax payers in the UK is made up of 310,000 individuals with a taxable income of at least £160,000 – but to be in the top 0.1%, that income must be nearly £650,000.
Almost half of the top 0.1% are based in London, over 40% are aged between 45-54, and only 11% of them are women.
“If you are at the 90th percentile,” the IFS notes, “you may well feel more like the person at the median (21.6 million adults below you in the distribution) than the person at the 99th percentile (just 4.9 million people above you).”
The data shows highest income, rather than highest wealth, but highlights the significant contribution that the highest taxpayers give to the UK’s public finances.
The highest 1% of income taxpayers account for 27% of all income tax. It’s a more top-heavy tax than both National Insurance Contributions (NICs) and VAT, although less so than Stamp Duty Land Tax and Inheritance Tax.
Of the 54 million adults in the UK in 2014-15, 31 million paid income tax – which means that around 43% of adults in the UK do not earn enough to pay income tax.
For two-thirds of taxpayers, employment is the most important single source of income. The top 1% receives comparatively more income from partnerships and dividends than the other 99%, although employment is still the largest source of income.
Business owners are an important part of the top 1% in the UK, which the IFS points out is a pattern replicated in the US. Offering tax breaks for business incomes, the IFS says, has meant that many of the beneficiaries of the advantage are at the top of income distribution in the UK.
Almost a quarter of the income at the level of the top 0.1% is from partnerships.
Of those in the top 1% who get most of their income from partnerships, 85% are in financial and professional services, business services, and the medical industry.
When running for leadership of the Conservatives, the now prime minister proposed tax policies that would mainly benefit the UK’s top 10% of earners, the IFS said at the time.
At a cost of billions to the Treasury, the IFS concluded that the tax cuts would mostly benefit the four million people with the highest incomes in the UK.