Only half of Brits paying income tax after Government’s decision to raise personal allowance

The top one per cent of earners will pay almost a third of income tax by 2020, and now nearly half of all working adults don’t pay it at all, new figures reveal.

A report by the Institute for Fiscal Studies found that the proportion of total income tax paid by the top centile rose to 27.5 per cent in the 2015-16 tax year, from 24.4 per cent in 2007-08.

Meanwhile, the government’s policy of gradually raising the point at which people start paying income tax meant that the share of the adult population paying it fell to 56.2 percent from 65.7 percent.

Chancellor George Osborne has repeatedly highlighted the fact that the richest pay more while those on lower incomes pay less as part of his bid to rebrand the Conservatives as the “worker’s party”.

Under Mr Osborne, the personal allowance has risen from £6,475 to £11,000, lifting millions of people out of the basic rate of income tax entirely.

The figures mean that some 300,000 individuals now contribute more than a quarter of the Government’s entire income tax take – equivalent to £49billion or £140,000 each.

The IFS said: “The recent increase in the share of tax coming from the top 1 per cent of taxpayers was driven by a series of policy changes.

“Some, notably the large increase in the personal tax allowance, took many low earners out of tax while also reducing payments for lower to middle taxpayers.

“While the personal allowance was increased, the higher-rate threshold was cut.

“Meanwhile, those on the highest incomes did not gain at all from the increase in the personal allowance, since a new policy introduced in 2010 means that it is gradually withdrawn once incomes rise above £100,000.

“In addition, big cuts in pension tax relief and the increase in the tax rate for those earning over £150,000 will have raised more revenue from the highest earners.”

The IFS study was withering about the Government’s wider approach to the tax system, saying there was ‘no sign of a long-term strategy on tax’.

While income tax has increasingly been shifted on to the better off, the increase in VAT from 17.5 per cent to 20 has hit all sections of society.

And although wealthy individuals have been hit relatively hard, big corporations have largely escaped. Mr Osborne has repeatedly cut corporation tax to encourage investment in the UK, but the IFS said receipts from the tax were on course to decline by a third over a decade.

The study found that corporation tax cuts delivered by the Chancellor since 2010 were equivalent to £10.8 billion a year.