Rising tax burden weighs on higher earners amid growing wealth tax fears

Higher earners in the UK are already facing a ‘significant’ tax burden and growing speculation of potential new taxes on wealth is exacerbating concerns, Rathbones has warned.

It calculated that an individual earning £150,000 would pay £53,703 in income tax, while someone earning the median salary of £39,039 would pay around £5,294 in income tax each year.

Therefore, a £150,000 earner receives 3.8 times the income of a median full-time worker, but would pay more than 10 times as much income tax.

Over four years, someone earning £150,000 would pay more than £214,800 in income tax - roughly the same amount of income tax a median full-time worker would pay over 40 years.

Rathbones’ calculations exclude national insurance, pension contributions, student loan repayments, benefits, and tax credits.

The wealth management firm estimated that someone earning £120,000 would pay around 7.45 times as much income tax as a median earner, while an individual earning £80,000 would pay approximately 3.67 times as much.

“The UK has a highly progressive income tax system that relies heavily on a relatively small group of higher earners,” commented Rathbones investment director, Jay Lawrence.

“At the same time, inflation and frozen tax thresholds have steadily chipped away at the real-world value of a six-figure salary. Many people are finding themselves pushed into higher tax bands without experiencing a corresponding improvement in their standard of living.

"This is particularly true for HENRYs — high earners, not rich yet. On paper, they may appear affluent, but many are balancing large mortgages, childcare costs, pension contributions and other financial commitments.”

Lawrence added that many of Rathbones’ clients were concerns that they could bear a rising share of the tax burden as the government looks to fund its spending commitments within its fiscal constraints.

"We have encountered highly paid professionals who are reviewing their long-term tax position, including the possibility of relocating to more tax-efficient jurisdictions, and the introduction of a wealth tax risks creating similar questions for entrepreneurs,” he said.

"If policies result in highly skilled workers, entrepreneurs and investors choosing to leave the UK, that risks undermining the government's broader objectives of boosting growth, attracting investment and improving the country's long-term economic prospects."

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