The top one per cent of earners pay over a quarter of all income tax, according to the Institute of Fiscal Studies

James Nickerson
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There has been a trend toward higher payments from the top one per cent (Source: Getty)

The UK's top one per cent of earners is now paying more than a quarter of all income tax, according to a new report.

Research from the Institute of Fiscal Studies (IFS) found that the proportion of overall income tax paid by the top one per cent of earnings had risen to 27.5 per cent in 2015-16 from 24.4 per cent in 2007-08.

Meanwhile, between 2007–08 and 2015–16, the share of the adult population who pay income tax dropped from 65.7 per cent to 56.2 per cent.

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The IFS said that the increased reliance on a small number of income tax payers follows a longer-run trend that was driven largely by above-average increases in top incomes.

"Since 2008, this increased reliance has been largely driven by the policy choices to increase the personal allowance, cut the higher-rate threshold, introduce the additional rate and cut pension tax relief," the report said.

In 1978-88 the top one per cent paid 11 per cent of total income tax, and since then there has been a growing tax burden on the group as inequality has risen.

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"Inequality increased considerably, such that the larger burden on richer taxpayers mostly reflected their higher share of total incomes," the IFS said.

"It seems unlikely that this trend will unwind substantially over the next five years. The 2015 Conservative party election manifesto pledged to increase the personal allowance to £12,500 by 2020–21, another substantial increase.

"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. 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 added.

The report comes after chancellor George Osborne announced that one per cent of earnings contributed 28 per cent of the total amount of tax collected.

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