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UK high earners pay more tax than the European average

The UK has lost its title as one of Europe’s low-tax jurisdictions, according to research from UHY International.

The findings reveal that UK high earners pay 3% more tax compared to the European average – ranking higher than France, Spain and Poland.

The report shows that UK individuals earning $250,000 per annum pay $103,721 in tax compared with an average of $100,398 in tax and social security contributions among European countries.

UK Prime Minister Boris Johnson said he would raise the higher rate threshold from £50,000 to £80,000, raising questions over the UK’s future policy on tax income. Johnson also said he would raise the point at which individuals begin paying National Insurance Contributions.

This change will benefit nearly four million – or 8% – of UK taxpayers in the short term.

Out of the 30 countries studied, Russia showed to have the lowest income tax rate where all tax payers pay just 13% income tax. Denmark was ranked the highest, taxing individuals 53.2% if they earn more than $1.5m.

The UK is ranked ninth among the 30 countries studies, with individuals earning $250,000 being taxed 41.5% of their income.

UHY Hacker Young partner Mark Giddens said: “It will come as a surprise to see that high earners in the UK pay more in tax than in traditionally high-tax economies like France.

“Boris Johnson is under pressure to make the UK as competitive as possible post-Brexit, and part of his plan seems to be income tax cuts.

“While restrictions on immigration are hitting the headlines, it remains the government’s stated intention to attract ‘the brightest and best’ to the UK. Reducing taxes for high earners and corporates could help the UK better compete in a post-Brexit world.

“It is always important for countries like the UK to attract internationally mobile HNWIs, who can help attract investment and create jobs. Being competitive on income tax is a big part of that.”

UHY International chairman Rick David said: “Taxes on the top earners residing in G7 economies have eased off slightly since the changes imposed after the financial crisis.

“Many Western European governments are still concerned though that their jurisdictions may become uncompetitive given the low tax rates in other developing jurisdictions so a number of countries have now taken steps to reduce their top rate of tax.

“However, as developing countries mature and their middle classes expand, governments may decide to increase their marginal rates of tax on higher earners to meet greater demand for public services. This is beginning to happen in Asian countries such as India and China which have gradually been taxing higher incomes more and lower incomes less.

“Over time, as the population of developing countries becomes wealthier, this tax disparity between the G7 and BRIC economies could reduce.” 


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