How much tax do the rich really pay? Evidence from the UK

Arun Advani, Helen Hughson and Andy Summers

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Using anonymized administrative data on the population of UK taxpayers, we show that—in line with high-profile anecdotes about the tax affairs of the rich—effective average tax rates (EATRs) decline at the top of the distribution of income and capital gains. We also document substantial variation in EATRs within remuneration level: a quarter of those in the top 1 per cent pay headline rates, while another quarter pay at least 9pp less than the headline rate. Most of this effect is driven by the composition of remuneration, with investment income having lower tax rates and capital gains having lower rates still. If all individuals with income above £100,000 paid the headline rates, this would raise tax revenue on income and gains by £23 billion on a static basis, an increase of 27 per cent in the tax paid by this group.

Keywords: inequality; horizontal equity; effective tax rates; capital gains tax (search for similar items in EconPapers)
JEL-codes: D63 H23 H24 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2023-08-18
New Economics Papers: this item is included in nep-pbe and nep-pub
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Citations: View citations in EconPapers (2)

Published in Oxford Review of Economic Policy, 18, August, 2023, 39(3), pp. 406-437. ISSN: 0266-903X

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Journal Article: How much tax do the rich really pay? Evidence from the UK (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:120356

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