The UK needs as many high earning contractors, entrepreneurs and highly paid employees as possible to come and live in the UK. To make this happen, we need a tax system that not only rewards high earners fairly, but also taxes them fairly.
Three recent headlines based on data from HMRC and research by KPMG underpin this argument:
- In 2013-14, the UK’s top earners will pay a third of all income tax (from the Telegraph). The top 1% of earners pay nearly one third (29.8%) of all income tax receipts collected by HMRC and paid to the Treasury
- The UK’s top 30,000 income tax payers, representing the top 0.1% of earners, pay HMRC £22bn per year, which has doubled over the last ten years (from IFAonline and the Daily Mail)
- The UK drops from joint 5th to joint 11th highest in the European Union’s ranking of top rates of personal tax (from KPMG research).
The Telegraph points out that to be in the top 1%, you need to be earning £160,000 or more. That’s more than most contractors earn, but there are a good few who are in that income bracket and higher. IFAonline highlights that the top 0.1% of earners pay out on average £750,000 each to HMRC every year.
Clearly, having more high earners is desirable, as they contribute so much to the Exchequer. And KPMG’s research shows that, for once, our political masters may be moving in the right direction.
According to KPMG, the UK has actually fallen six places down the league table of highest personal tax regimes in the European Union as a result of the coalition’s decision to cut the top rate of tax from 50% to 45%.
The UK has bucked a global trend to increase personal taxation. What’s also significant is that elsewhere other countries are increasing personal taxation, mainly by imposing wealth taxes and temporary taxes on higher earners.
That’s good news for us, because we want all of those disgruntled high net worth individuals getting stuffed by their tax authorities at home to come and live in the UK, pay income taxes and buy lots of goods and services so they pay even more taxes.
To borrow a phrase much overused by coalition politicians, those with the broadest shoulders income-wise really are carrying a much greater burden than most of the rest of us. Let’s hope the government doesn’t give in to media pressure and bullying by civil servants and do something daft like increase income taxes on higher earners.
That’s because we want those highly paid contractors, entrepreneurs and employees already here and making such huge tax contributions to stay. We also want them to tell all their friends how little tax, relatively speaking, they are paying, to encourage immigration of high earners from highly taxed countries.