‘Just one in ten’ of highest earners pay top rate of tax

By the Editorial Team · Wednesday, September 23, 2026

Analysis reveals that only 10 percent of the UK’s wealthiest 0.01 percent of taxpayers pay the highest income tax rate due to much of their income coming from lower-taxed capital gains. Researchers are urging Chancellor John Healey to raise capital gains tax rates in the upcoming Budget, which could generate nearly £20 billion by 2030 and address shrinking fiscal flexibility.

Only a small fraction of the highest earners in the United Kingdom currently pay the top income tax rate, according to a recent analysis, prompting renewed calls for changes to capital gains tax in the upcoming Budget to boost government revenue.

Researchers from the Centre for Analysis of Taxation (CenTax) found that just 10 percent of the wealthiest 0.01 percent of taxpayers paid near the top rate of 47 percent, which includes income tax and national insurance contributions on earnings. Meanwhile, 25 percent of this ultra-wealthy group faced an effective tax rate of 20 percent or less. The lower overall tax burden is primarily attributed to a significant portion of their income coming from capital gains, which are taxed at a maximum rate of 24 percent, below the top income tax rate.

The findings are based on anonymized data from Her Majesty’s Revenue and Customs (HMRC) for the year 2022. CenTax noted that following the capital gains tax rate increases enacted in October 2024 under former Chancellor Rachel Reeves, the effective tax rate on the richest individuals likely rose to around 23 percent.

CenTax has urged Chancellor John Healey to further align capital gains tax rates with income tax rates in the upcoming Budget scheduled for October 28. The organization estimates that such a measure could raise an additional £19.7 billion by 2030, bolstering Treasury coffers amid tightening fiscal conditions.

Opponents of raising capital gains taxes warn that higher rates could dampen investment incentives, discourage entrepreneurship, and potentially lead to an increase in wealthy individuals leaving the UK. The debate comes as economists suggest that Healey’s fiscal headroom—a measure of the government’s flexibility under fiscal rules—has shrunk from £23.7 billion to £10 billion, largely due to rising government bond yields influenced by geopolitical tensions following the conflict in Iran.

Separately, reports indicate that Downing Street and the Treasury have contemplated lowering the property value threshold for a forthcoming mansion tax to £1.5 million, signaling a possible more aggressive approach to taxing wealth.

Andy Summers, CenTax director and law professor at the London School of Economics, emphasized the complexity of the tax landscape for top earners: “The assumption that our tax system is already steeply progressive only holds for some top earners and is frequently not true at the very top.”

The Treasury has been contacted for comment but has not made a public statement at this time.

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