The richest 1pc pay twice as much tax as the poorest 50pc CREDIT: THE TELEGRAPH
The tax burden shouldered by Britain’s wealthiest has almost trebled since the 1970s, analysis of historic data reveals – further undermining the Conservative’s reputation as a “low tax” party.
Daily Telegraph analysis of nearly four decades of tax and income records shows high earners are now responsible for paying a higher proportion of Britain’s total income tax bill than they have done under any Labour government.
Today the top 1pc of income taxpayers, who earn in excess of £162,000 a year, now pay nearly a third (27pc) of all income tax.
By comparison under James Callaghan’s notoriously “high tax” Labour government in 1976, the top 1pc paid just 11pc of total income tax receipts.
Following Philip Hammond’s Budget decision to raise National Insurance contributions for the self-employed – since reversed – a poll revealed that the majority of the public no longer consider the Tories a party of low tax.
In addition today’s top 10pc of taxpayers, who earn over £51,400, are paying nearly twice as much towards the UK’s total tax take than the wealthiest decile did in the Seventies.
Collectively they now pay 59pc of total income tax, up from 35pc in 1976.
The analysis also found taxes on top earners are higher than they were during Gordon Brown’s Labour government in 2007.
It confirms that under Theresa May’s current regime, both groups are making a bigger contribution to the UK’s total income tax receipts than they have done at any other point during the post-war era.
Taxes have crept upwards as the Government continues to make “difficult decisions” in how to reduce the deficit, and in how to fund and invest in public services, including the NHS and social care.
It comes after just one in four voters in a poll for this newspaper said they now regard the Tories as a low-tax party, while almost half say they trust the Conservatives less as a result of Mr Hammond’s recent Budget.
Just last week the Prime Minister and her Chancellor were forced to U-turn on the decision to increase National Insurance Contributions for self-employed people after a rebellion from their own MPs.
Last night Conservative politicians criticized the current tax system and warned that the tax burden on the wealthy had reached a point where it was in danger of damaging the economy.
Lord Lamont, who served as Chancellor under the Conservative Government in the early nineties, warned higher taxes could put off wealthy foreigners from coming to the UK.
He said: “We have succeeded in attracting a lot of high-net worth individuals and that should be applauded.
“[But] It would be wrong to think you can always rely on someone else to pay taxes. Robbing Peter to pay Paul, Paul will always vote for that but it won’t always work. “I’m not a great fan of ever increasing the personal tax allowance because everyone should pay some tax.”
Andrew Brigden, a Conservative MP, warned taxes on the wealthy were at the point where any further increase could threaten their productivity.
He said: Tax should never be a punishment for the wealthy. The higher you raise tax, the less money you get in. I think we have reached that point. If we put the top rate of tax back to 40pc [from 45pc] we would raise more revenue because people would be more encouraged to be productive.”
In 1974 the top rate of tax was raised to 83pc by the then Chancellor Dennis Healey, as part of a tax regime which he famously said would “make the pips squeak”, in desperate bid to boost the failing economy.
Over the period which lasted from 1974 to 1979, when Margaret Thatcher’s Conservatives took power, there was also an investment income tax surcharge of 15pc which pushed the top rate up to 98pc for some taxpayers.
When the 83pc rate was introduced just 46,000 people were eligible to pay it as the minimum earnings threshold was £20,000, equivalent to £191,000 in today’s money.
Back then a salary of around £8,000 a year would be enough to put someone in the top 1pc of earners.
In his 1974 Budget speech Dennis Healey justified the tax hikes, saying: “The richer you are, the less you need to cut your standard of life when your taxes go up; you are more likely to meet the increase in your taxes simply by drawing on your bank balance.” Margaret Thatcher, who favoured indirect taxation, reduced personal income tax rates during the 1980s.
In the first budget after her election victory in 1979, she reduced the top rate from 83pc to 60pc and the basic rate from 33pc to 30pc. The basic rate was also cut for three successive budgets – to 29pc in the 1986 budget, 27pc in 1987 and to 25pc in 1988. The top rate of income tax was cut to 40pc in the 1988 budget.
Today the top rate of tax is charged at 45pc and is payable by taxpayers with earnings of over £150,000 a year.
Earnings between £33,001 and £150,000 are taxed at 40pc, while earnings below £33,001 and above the personal allowance are taxed at 20pc.
From April this year the personal allowance, which is the amount someone can earn per year before paying tax, will be raised from £11,000 to £11,500.
A Treasury spokeswoman said:” Our reforms to the tax system mean hard working people are keeping more of what they earn.
“Increases to the personal allowance will take millions of people out of income tax altogether this parliament, including 4 million over the last parliament alone.
“The government must make difficult decisions in how to reduce the deficit, and in how to fund and invest in our vital public services, including the NHS and social care.”
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