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U.K.'s Top 1% of Earners Now Paying a Quarter of All Income Tax

  • IFS study finds government revenues increasingly rely on rich
  • Share of population paying any income tax falls to 56%

The 1 percent may not be popular among protest marchers, but in the U.K. they’re now paying more than a quarter of all income tax.

A report by the Institute for Fiscal Studies published Wednesday found that the proportion of total income tax paid by the top centile rose to 27.5 percent in the 2015-16 tax year from 24.4 percent in 2007-08. Meanwhile, the government’s policy of gradually raising the point at which people start paying income tax meant that the share of the adult population paying it fell to 56.2 percent from 65.7 percent.

The shift is partly the result of long-term trends. In 1978-79, the richest 1 percent paid 11 percent of total income-tax receipts. Since then, growing inequality has meant that the larger tax burden on the richest reflects their rising incomes.

“One implication of an income-tax base that increasingly relies on a smaller group of taxpayers is that the growth of receipts may be more unpredictable and risky,” the IFS said. “As the system becomes more reliant on a smaller subset of individuals, tax revenues become more sensitive to the composition of income growth, making revenues more uncertain.”

It’s not just the very highest earners who have been affected. Over the same period, the number of people paying tax at the higher 40 percent rate and above rose to 5 million from 3.9 million.

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