- 20% increase in the amount of income tax collected from the top five towns with the highest average payments over the last five years
- ‘Fiscal drag’ pulling taxpayers in wealthy areas into higher tax brackets
Elmbridge, known as the ‘Beverley Hills of Britain’ is the UK’s number one hotspot, with the average Income Tax payment per person hitting £20,500, up 10% from £18,500 in the last year, our research shows.
In comparison, the average Income Tax payment for the UK was just £4,794 per person, up 5% from £4,547 over the same period.
The high levels of tax paid reflects how the area is populated with wealthy sportspeople, entertainers and musicians, as well as city executives due to its proximity to London. Elmbridge has an average income of £73,600, double the UK average of £30,688.
Famous residents of the local area include Andy Murray and Kim Sears, John Terry, Sir Elton John, Antonio Banderas and Chris Tarrant.
Elmbridge has now increased its lead on other wealthy areas in the home counties, including second place Beaconsfield in Buckinghamshire. The average payment in Beaconsfield was £14,700 last year, up from £13,900 the year before. Chesham & Amersham, which is also in Buckinghamshire, came third with £14,300 (see table).
The amount of Income Tax collected from the top five towns with the highest average payments per person has increased 20% to £15,540 over the last five years, up from £12,380 in 2010/11. Meanwhile, the national average increased 16%, up from £4,150, over the same period.
The increasing amount collected from the top five towns may be the result of fiscal drag, which occurs when income tax brackets do not move with inflation. As a result, more individuals fall into upper tax brackets, increasing overall tax payments.
A recent report** found that while inflation has increased 26% since 2008, the higher-rate tax threshold has only risen 13.5% over the same period. As a result, nearly five million taxpayers have been pulled into paying the 40% or 45% tax rate that would not have been otherwise.
There are likely to be more people subject to fiscal drag in areas with higher average incomes, such as Elmbridge and Beaconsfield.
Mark Giddens, head of private client services in our London office, says: “The ‘Beverley Hills of Britain’ has strengthened its position as the UK’s number one tax hotspot.”
“HM Treasury is increasingly reliant on the tax collected from London and the South East, which reflects the continuing success of the economy in this part of the UK.”
“Many residents in towns and areas with high average payments may have been pulled into higher tax brackets through the effects of fiscal drag. This can increase average payments for the area, despite many people only just falling into higher tax brackets.”
Top ten constituencies with the highest average Income Tax per taxpayer last year