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Who pays the most tax in the UK?

There is a vast array of programmes and feature articles about the luxury lifestyle of Britain’s highest earners. It is easy for displays of extravagance to provoke feelings of envy, or judgement at their perceived excess. Particularly with all the talk of income tax during the countdown to the self assessment filing deadline.

It is easy to forget that the highest earners in the UK pay the most income tax to HMRC and we all benefit from this wealth. This new ‘Tax List’ is compiled by the Sunday Times newspaper, a new angle on their annual ‘Rich List’.

How do you qualify for the Sunday Times Tax List?

To make it into the Sunday Times Tax List, you must pay HMRC a minimum of £12.1m in income tax. That’s the tax on: personal salaries, dividends, house purchases, sales of shares and profits from business activities.

The Sunday Times put together this list using “a mass of publicly available documents”. It is an estimation of the tax paid by these individuals and, according to Times journalist Robert Watts, “is almost certainly making these figures conservative.

Do rich people have a different income tax rate?

The same income tax bands apply to everyone, earnings up to the current thresholds are taxed, in England, at 20% (Basic Rate) and 40% (Higher Rate). Anything you earn over £150,000 is taxed at a rate of 45%. In this way rich people do share their wealth by paying a lot more tax to HMRC.

So who exactly does pay the most tax in the UK?

Despite all the stories of tax avoidance and evasion schemes, it is predicted that 28% of all the income tax collected for 2017-18 will be paid by the highest 1% of earners. From this Sunday Times Tax List of 50 people, that is £2bn paid into the government’s bank account by just 50 individual taxpayers.

The top three in this list are:

1.Stephen Rubin: Worth £2,820m, tax bill £181.8m.

Mr Rubin has the Pentland Group, which includes brands you may know; JD Sports, SeaVees, Berghaus, Speedo and Mitre. This enormous tax bill can be broken down into Pentland Group corporation tax bill of £53.2m, £121.5m JD Sports and £6.86m on personal and family dividends.

2. Denise, John and Peter Coates: Worth £5,754m, tax bill £156.0m

Denise Coates is the founder of Bet365. She could have reduced her tax bill by £15m, had she taken dividends instead of her £220m salary.

3.Sir James Dyson and family: Worth £9,500m, tax bill £127.8m

Famous for applying new technology to home appliances.

Who else is on the list?

Perhaps the most famous people on this list are at number. Victoria and David Beckham are recorded as being worth £340m and have a tax bill on their combined earnings from football and fashion of £12.7m. This could have further significance, as it has previously been discussed that David Beckham is not yet a ‘Sir’ because of his tax situation.

As reported by the Guardian: “The couple were named on Companies House files as being linked to the finance firm Ingenious, which invested in films including Avatar, in a bid to secure tax relief. It has previously been reported the former Manchester United and England footballer was overlooked for a knighthood because of this investment, which has been subjected to scrutiny by HMRC.” This, even though it has been stated that neither Ingenious, nor its many investors, were involved in anything illegal.

Most of the other names would not be immediately familiar.  By industry, of the 50 top taxpayers:

  • 2: Fashion
  • 3: Chemicals
  • 3:Discount Stores
  • 3:Hedge Funds
  • 5: Construction
  • 5: Property
  • 7: Finance
  • 21: Other, including more than one industry

The ‘other’ category includes James and John Martin who are in the unexpected ‘Ejection seats’ industry. They are worth £765m and had a tax bill for £21.4m.

A bit of context…

Amazon turned over almost £2bn in the UK and only paid about £4.6m in tax. Starbucks had the same size tax bill, with a £380m UK turnover. This means that even those just scraping into this top tax payers list with a £12.1m tax bill are paying three times more than these multinational companies.

This Tax List does not account for further property taxes and VAT that these wealthy individuals also pay.

As Robert Watts points out: “Payments like these made by wealthy individuals add up. If you do find the super-rich objectionable, see little value in having their ilk here, or simply feel they should be paying a lot more tax, it’s worth considering the words of Jean-Baptiste Colbert, Louis XIV’s finance minister: “The art of taxation consists of in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”

The current concern is that more people will follow James Dyson’s example and take their wealth abroad as a consequence of Britain leaving the EU. How will Britain earn enough to cover the substantial loss in tax takings?

 

 

January 28th, 2019|Tax News|

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