Publications that covered this story include: City AM and Accountancy Daily.
- ‘Britain’s Beverly Hills’ pays 24% of their income in Income Tax – triple the UK average
Nine of the Top 10 UK towns paying the highest levels of Income Tax are ‘Stockbroker Belt’ towns, our research shows.
The residents of Esher (Surrey) paid the highest rate of income tax as a percentage of their income out of the 579 towns and cities in the study. Residents of Esher paid an average income tax of 28% of their £68,600 in earnings.
Well-heeled ‘Stockbroker Belt’ towns in the South East are popular areas for wealthy commuters and High Net Worth Individuals due to strong transport links with London and proximity to main airports. Esher, nicknamed “Britain’s Beverly Hills”, is home to a number of high-profile celebrities and sportsmen including Elton John, Gary Lineker and Andy Murray.
The amount of income tax that residents in the Top 10 towns contribute has risen by 20% on average over the last five years. Residents can now expect to pay £13,850 in income tax or 24% of their income, up from £11,630 five years ago. This is triple the UK average of £4,617 or 15% of annual income.
Ranking last out of all areas in the UK is Nottingham North, with the average resident paying £2,080 in income tax – just 10% of their income.
In addition to high levels of income tax, residents in ‘Stockbroker Belt’ towns and other wealthy areas face a growing tax burden from a number of tax traps and frozen allowances. This is because the Government has not increased many tax thresholds in line with inflation, which is dragging more individuals into higher tax brackets. Tax thresholds that have remained frozen include:
- Inheritance Tax threshold has been fixed at £325,000 for a decade
- Tax-free income allowance is zero if you earn over £125,000
- £50,000 threshold at which child benefit is withdrawn via income tax
- £100,000 threshold at which eligibility for ‘tax-free childcare’ is removed
- Annual pensions allowance – for those earning over £150,000 a year, the annual allowance can be as low as £10,000
Neela Chauhan, Tax Partner in our London office, says: “The South East has cemented its position as one of the most affluent areas in the UK. This is likely to continue for years to come as Stockbroker Belt towns attract high earning celebrities and City workers alike.”
“However, the Government needs to be careful not to kill this golden goose by overtaxing it. We have seen signs in some areas, such as non-doms, that higher levels of tax is gradually driving high earners out of the country.”
Almost all of the Top 10 towns paying the highest level of income tax are located in the South East
The rest of the top five highest income tax paying areas are also towns surrounding London, including Beaconsfield which ranked second. Residents of Beaconsfield pay £14,800 on average in income tax or 25% of their income.
The North/South divide in income tax
The data reveals that the only constituency in the Top 10 located outside of the South East of England is Altrincham. Altrincham surrounds the city of Manchester which is home to premiership footballers and managers including Sir Alex Ferguson, Peter Crouch and Rio Ferdinand. Residents in Altrincham pay £12,600 in income tax on average, accounting for 24% of their annual income.
The Bottom 10 constituencies paying the least amount of Income Tax as a percentage of their income are all located in the Midlands, North of England or Wales.
Neela Chauhan explains: “The stark economic divide between the North and South regions of the UK has built up over decades and the action needed to reverse this will be tasking. Whilst we are seeing Manchester evolving as an alternative business hub to London, it would be good to see more spill-over into surrounding towns.”
The towns paying the lowest level of income tax are mostly located in the North of England