The top 0.1% of earners in the UK have annual incomes in excess of £500,000.
More than 50,000 people in the top income bracket account for 6% of all earnings – 60 times greater than their population share, said the Institute for Fiscal Studies in a report covering the 10 years to 2019.
Earnings from self-employment and business ownership were far more important for those at the top end compared with low and middle earners because income from company ownership is taxed at a lower rate than earnings from work. Business income – from either self-employment or owning and running a company – accounts for 21% of total incomes for the top 1% of adults and 29% for the top 0.1%, compared with just 9% for the rest of the population at large.
Business owner-managers could effectively choose to take income out of their company through the form of a salary, dividends, or capital gains – allowing them to benefit from lower rates of tax. The report pointed to a preferential 10% rate of capital gains tax, called business asset disposal relief, while saying that company owner-managers were able to access tax rates of just 27% on income taken in the form of capital gains.
In comparison, the average tax rate on wage earners in the top 1% is 42%. The government sets the basic rate of income tax at 20% on earnings above the tax-free personal allowance of £12,571, up to £50,270, with a rate of 40% on income above £50,271, and 45% above £150,000.
Only 2,921 people employed by local authorities in 2020-21 received more than £100,000 in total remuneration and 739 received over £150,000, 46 more than the previous year. According to the Institute for Government, just 1,560 of the 456,410 civil servants earned more than £100,000 in 2020. Across the whole civil service, the majority of staff (55%) were paid below £30,000.
UK’s top 0.1% earners have annual income of over half a million, says IFS | Business | The Guardian
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