The Top 1%

How much taxable income would take you into the top 1% of UK income tax payers?
The answer may be smaller than you think: to join that select band of about 310,000 taxpaying individuals, you need taxable income of at least £160,000 a year. It is only when you get to the top 0.1% tier that the figure reaches £650,000.
As part of its research into inequality, the Institute for Fiscal Studies (IFS) has issued a briefing note on that top 1%, a prime target market for financial services providers (and HMRC). The key findings of the IFS were:
To be in the top 1% of adults by income (as opposed to the top 1% of income tax payers) requires a minimum pre-tax income of £120,000. That covers 540,000 people.
As might be expected, the top 1% of income tax payers are disproportionately male, middle-aged and London-based. Almost half of the top 0.1% are based in London and 89% are male.
The top 1% of income tax payers has become more geographically concentrated since 2000. Half of all of the top 1% can now be found in just 65 (out of 650) parliamentary constituencies. In 2000/01, 78 constituencies were required to reach the same halfway mark.
Partnership and dividend income account for over a quarter of the total income of the top 1%, and over a third of the total income of the top 0.1%. Those on lower income have a much smaller share of income in these two categories. As the IFS notes, partnership and dividend income are taxed more favourably than normal salaries – a de facto policy choice in favour of business owners.
The top 1% of income tax payers is not a stable group. The IFS found that a quarter of those in the top 1% in one year disappear in the next. After five years, only half will still be in the top 1%. Past performance is not necessarily…
A corollary of the turnover of the top 1% is that someone has a much higher chance of being in the top 1% at some point in their lives than they do in any single year. For example, 3.4% of all people (and 5.5% of men) born in 1963 were in the top 1% of income tax payers at some point between 2000/01 and 2015/16.

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