A small club of ultra wealthy Londoners scooped a tax break equal to every northerner in the country combined according to figures unearthed by Tax Justice UK.
The finding emerged ahead of next week’s budget when the Chancellor is rumoured to be considering equalising capital gains - the profits made when selling shares, investment property and other assets - with income tax. The policy could raise £14bn a year according to government estimates.
Our research shows that by focusing tax rises on wealthy taxpayers in the south, such a move would support the government’s levelling up agenda.
Based on HMRC statistics, we found that people who live in London and the southeast of England receive half of all capital gains, despite only making up a quarter of the population. In contrast, people in the north of England and the midlands receive just a quarter of capital gains despite making up 40% of the UK’s population.
For the very highest earners, the figures are even more skewed. The 1,586 individuals in London with capital gains of over £1.6 million a year take home more in gains (£9bn) than all individuals in the north of England (£8bn of gains). Gains of £1.6 million a year million puts you in the top 0.01% of earners.
Recent research from LSE and the University of Warwick found that high earners can use capital gains to slash their total tax bills. For example, the average tax rate of someone netting £10m is just 21%. Capital gains are also highly concentrated, with 62 percent of capital gains going to just 9,000 people with gains of over £1m.
A review from the Office of Tax Simplification commissioned by the Chancellor suggested taxing capital gains at the same level as income tax and removing loopholes such as wiping out gains on death. Rumours in advance of the March budget suggest that Rishi Sunak is seriously looking at increasing capital gains tax.
Our breakdown of how CGT is distributed regionally can be viewed here. It is based on publicly available HMRC statistics and a freedom of information response to Tax Justice UK.
We would like to thank Dr Andy Summers (LSE) and Dr Arun Advani (University of Warwick) for their support with this research. All errors remain our own.