Labour's tax the rich plan

 Labour clearly thinks taxing the rich is the way forward (rather than cutting government spending).

However, a bit like Labour's "we wont tax working people statement", who are the rich?

Starmer, who is allegedly worth £7.7Million, doesn't consider himself to be rich so who are the rich?

So where does tax revenue come from?

The top 1% pay 29% of all tax income

The top 10% of earners pay 60% of all tax income.

Over 60s pay 11% of all tax.

"Working age" 50-64 pay 34% of all tax

The narrative is that the ultra rich are not paying their fair share. So the top 1% pay 29% of all tax.  They are paying more tax than ever. The top 1% paid 25% of all tax in 2010 and they paid 21% of all tax in 2000.  So the tax take from the richest has increased 38% in 25 years.

The 40% tax band starts at £50,270 so presumably if you earn that much you must be "rich".

In the 1990s just 3.5% of the population paid 40% tax. It increased to 4.1 Million people in 2021 (6% of the population) and due to rates being frozen for over a decade in 2025 it is expected to be 7 Million (10% of the population). 

So the "not-so-rich" are paying more tax than ever.

This isnt because there are more "rich" people paying higher rate tax - it's because the threshold at which 40% tax is due has been frozen for so long that more and more average people are being dragged into the 40% tax band.

The 40% tax band in 2008 was £34,800 and this was increased to £37,400 in 2009. It should be pointed out that the nil rate personal allowance was just £2,440 whereas today it's £12,570. The 20% tax band was £37,400 meaning you started paying 40% tax band at £37,401. Basically this £37,400 band size hasnt changed since 2009.  If we add £12,570 nil rate band + £37,400 we get £49,971 which is a few pounds different to the £50,271 threshold today.   Using the Bank of England inflation calculator, if the 20% band size had kept pace with inflation it would be £59,805 so the salary at which you would start paying 40% tax would be  £72,375.  That equates to an additional £8,842 in tax.

Rachel has frozen the threshold until  2030 and by then it is expected to be around 12% of the population paying 40% tax.  That's population not working people.

The population is supposed to be 68 Million (I suspect there are maybe 10 million invisible people) but let's assume it's correct.

For the year 21/22 there were 32.2 million tax payers.  27 million of these were basic rate tax payers. 4.13 million paid 40% tax and 440,000 paid the highest rate of tax. The number of people paying this had increased by 10.3% since 18/19 tax year.  The higher rate tax payers (ie 440,000 people) contributed 13.1% of all tax.

Just going back to the population of 68 million. That means 35.8 million people paid zero tax. More than half the population paid nothing. So for every tax payer, they are paying for somebody else.

Let's assume that the age group 0-18 account for 16 million people.  Let's assume There's about 4 million pensioners aged over 70. So that's 20 million people of the 35.8 million non tax payers. It does beg the question what more than half the population are doing?

There are 1.67 million unemployed people aged over 16. Where are the other 20 million people?

If someone is on minimum wage and working full-time, they are on £25,396 per year so will absolutely be paying tax - not zero tax. Where are all these people paying zero tax?

Maybe it's all the gig economy people who are not paying their fair share of taxes?

Minimum wage is £12.21 per hour. So Assuming these 20 million people are not unemployed and they are not paying tax that means they are working a maximum of 1,029 hours per year or a maximum of 20 hours per week. Strangely enough you can work 16 hours per week before your job seekers allowance is affected and 16.8 hours before universal credit is stopped. It looks like these 20 million people are basically keeping below the threshold in order than they don't lose their benefits. Net result is they dont pay tax.  

So if someone over 25 is on job seekers allowance they are getting £4,786 per year benefits and they are working 832 hours per year on minimum wage so they are getting £10,158 wages (untaxed).  That means their gross income is £14,945 per year which is above the £12,570 threshold yet it's not taxed!! (£475 in tax avoided).  

Similarly Universal Credit is not taxable. So let's assume you are over 25 and  getting Job Seekers allowance and the standard Universal Credit allowance of £400.14 and working a maximum of 16 hours per week. That means your overall tax free income is £19,747 per year and you're not paying a penny in tax. That's £1,435.40 in tax avoided !

Interestingly the constraint on benefits is hours per week not how much you are paid. So If you work 16 hours per week and find a job paying £15.10 per hour you can earn £12,570 per year and still get your benefits and pay zero tax (£22,158 - actually more than our minimum wage worker after tax). 

So let's return to our hard working minimum wage worker earning  £25,396 per year. They will have a total take home salary of £21,806.52.  That's just £2,059.52 less than someone on benefits working part-time and £351 worse off that our person earning £15.10/hr part time . 

It does beg the question why work when  you can take it easy!

Measurement drives behaviour.

It looks like genuine tax payers are subsiding tax avoidance for the low paid on a massive scale.

We know that Labour's attack on the super rich has resulted in about 1,000 millionaires per week leaving the UK. Remember the top 1% pay 29% of all tax income. So the population of this cohort is decreasing and therefore the burden of taxation will slip down the ladder to the next cohort.

Labour's response is that this is fake news. There are clearly named individuals who have left for low tax countries like Italy and Dubai. If it's not fake (I think it is probably true as I know several people who have left) then Labour has a huge time-bomb on their hands.

So 680k people pay 29% of all tax. If it is true and we are losing 1,000 millionaires per week that's 52,000 fewer in 2025 - roughly 10% less. The remaining 628k are not going to make up the shortfall so that means the tax take from this group will decrease from 29% to 26.1% this year.  Assuming this exodus continues for the next 4 years of Labours term that means the remaining 420k  "top 1%" will be paying only 18% of all taxes falling from 29% by 2029. Who is going to make up this MASSIVE 11% fall in tax revenues?

It looks like Labour think it is true and hence Labour are clearly sounding out a wealth tax.  Wealth taxes have failed in every country that has implemented it except Switzerland. In Switzerland's case it's the only tax the super rich pay so they probably think they are getting a good deal. Given this incompetent government always get things wrong - the law of unintended consequences will be droves of rich fleeing the country leaving the tax burden for the next cohort down the ladder.

Something is going to break.

"The problem with socialism is that you eventually run out of other people's money," Margaret Thatcher

Maybe Starmer will pay more rich tax after-all as he bubbles up to the top of the rich list.....

Or of course we can take the Milei approach and start cutting wasteful government spending.  What are the 400k extra government employees we have since the pandemic doing for example?

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Well it didnt take long.  Rachel is being urged by advisors to tax the middle class more as the rich have fled the country in droves and are no longer paying tax and there's a huge drop in receipts from the rich. 

Some of the drop in tax receipts from the rich is due to carried interest relief (private equity) where the tax rates were increased from 28% to 45%.

Read the report here Tax Payer Alliance Analysis

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Well there is clear undeniable evidence the rich are leaving the UK.  We have named individuals in the news and now the FT has analysed Companies House filing showing that almost 4,000 company directors have quit the UK since the Autumn Budget. UAE (Dubai) is the most popular destination for these leavers. Maybe it's not 1,000 per week but it's clear there is a "brain drain" or rather "rich drain".

Welcome to bankrupt Britain. Maybe HMRC should stop squandering tax payers money encouraging staff to feel guilty about being British.   HMRC staff hold classes on ‘the guilt of being British’

I'm disgusted at how morons running my country are destroying it. I must be a candidate for tax payer funded training (or should that be reconditioning) as I'm not towing the line - I'm proud to be British but I am disgusted at my government.