UK bucks global trend for reductions in income taxes over the past two decades

Publications that covered this story include City AM and Accountancy Age, both on 21 November 2016.
  • UK income tax rates for high earners rise by four percentage points – compared to global average cut of 5.6 percentage points
  • GDP growth lags behind global average over last 30 years

According to our latest research, the UK is one of the few economies in the world to have increased income taxes for high earners over the past two decades, raising the average rate paid by four percentage points for high earners with incomes of USD 1 million to 43% today from 39% in 1996.

By contrast, our research reveals that the average global effective income tax rate for taxpayers in this income bracket has fallen over a tenth to 35.8% from 41.4% twenty years ago.

Its European neighbours have cut tax rates back even faster for high earners – the European average decreased from 49% to 41% today.

The UK and Canada were the only major economies in the study to have raised income taxes for this earnings bracket over the period – but Canada’s increase was negligible, at just 0.3 percentage points.

We studied tax data in 26 countries across its international network, capturing the effective income tax rate for higher and lower income workers* (see table below).

Russia and India saw the biggest cuts of any major economies for higher earners, who have seen their income tax rate fall by 22 percentage points (from 35% to 13%) and 17% (from 51% to 34%) respectively.

However, lower earners in the UK whose income is USD30,000 have benefitted from income tax cuts, seeing their tax bills reduced by 9 percentage points (to 10% now from 19% in 1996). This is still less than the global average reduction of 11 percentage points (down to 16% today from 27% two decades ago).

We explain that the UK has increased personal allowances and decreased the basic rate of income tax to 20% today from 24% in 1996. Changes to National Insurance have also benefitted lower earners. However, at the other end of the scale, personal allowances for top earners have been phased out and new additional rates of tax introduced.

Mark Giddens, partner, comments: “In contrast with the global trend over the last twenty years, the UK has decided to increase the tax burden for its higher earners.”

“The argument made, by some, is that high taxes for higher earners reduces the incentives for those top earners and entrepreneurs to work harder and create more wealth and jobs.”

“While those on lower incomes have seen an improvement, the amount of tax high earners should pay has been the subject of fierce debate. Even those on more modest incomes, the so-called “squeezed middle”, have felt the pinch, with a decrease in their disposable income.”

UK GDP growth lags behind global average over last 30 years

Mark adds, “Although it is obviously only one factor amongst many, some analysts have suggested that lower tax rates may contribute to an improved rate of GDP growth.”

Our data reveals the extent of global economies’ GDP growth over the longer period of thirty years, since the UHY network was founded in 1986.

Their figures show that UK GDP has grown by 95% in the past three decades, compared to the global average of 135% GDP growth (see third table below).

Emerging and developing countries have grown significantly in the past thirty years – China the most, by 1421%. India (577%), Malaysia (479%), Bangladesh (350%) and Nigeria (333%) were also in the top five for GDP growth since 1986.

Russia saw GDP growth of just 15% as it suffered from a number of challenges, e.g. the need to reform a command economy following the end of communism.

Comments Mark, “Clearly, countries like China and India have boomed in recent years, but the scale of growth in many other emerging economies is also striking.”

“Developing nations have attracted high levels of Foreign Direct Investment as overseas companies have increasingly set up trade links and established operations in countries with lower cost bases to their own. This has helped many emerging economies invest in their own infrastructure as well as skills and knowledge bases, creating an upward spiral of growth.”

Income tax rates for higher earners (USD 1 million)

Rank Country 1996 Income Tax 2016 Income Tax Difference
Amount Rate Amount Rate Amount Rate
1 Uruguay 60,000.00 6.00% 275,662.00 28.00% 215,662 22.00%
2 Croatia 349,186.16 34.92% 394,086.71 39.41% 44,901 4.49%
3 UK 392,471.09 39.00% 431,774.32 43.00% 39,303 4.00%
4 Brazil 248,734.18 24.87% 271,506.49 27.15% 22,772 2.28%
5 Canada 506,508.00 50.56% 508,357.00 50.84% 1,849 0.28%
6 Israel 500,000.00 50.00% 500,000.00 50.00% 0 0.00%
7 UAE 0.00 0.00% 0.00 0.00% 0 0.00%
8 Nigeria 174,833.68 17.48% 171,977.23 17.20% -2,856 -0.28%
9 Malta 345,538.00 34.50% 340,262.00 34.03% -5,276 -0.47%
10 New Zealand 327,987.00 32.80% 323,421.00 32.30% -4,566 -0.50%
11 Spain 463,636.80 46.00% 439,857.08 44.00% -23,780 -2.00%
12 USA 375,576.00 37.60% 352,170.00 35.20% -23,406 -2.40%
13 Australia 462,246.00 46.26% 430,029.00 43.01% -32,217 -3.25%
14 Italy 492,507.00 49.25% 458,153.00 45.82% -34,354 -3.43%
G7 481,674.16 48.16% 434,090.47 43.41% -47,584 -4.75%
15 Belgium** 543,688.58 54.37% 494,833.19 49.48% -48,855 -4.89%
World 414,050.87 41.39% 357,815.25 35.80% -56,236 -5.59%
16 Netherlands 589,554.45 58.96% 510,555.11 51.06% -78,999 -7.90%
17 China 330,000.00 33.00% 250,000.00 25.00% -80,000 -8.00%
Europe 493,847.01 49.35% 413,076.62 41.04% -80,770 -8.31%
18 Japan 498,159.00 49.80% 411,997.00 41.20% -86,162 -8.60%
19 Rep. of Ireland 475,405.33 47.54% 388,785.00 38.85% -86,620 -8.69%
20 Germany*** 549,116.00 54.91% 448,063.00 44.81% -101,053 -10.10%
21 Denmark 637,533.00 63.75% 534,006.00 53.40% -103,527 -10.35%
BRICs 360,000.43 36.00% 248,643.43 24.87% -111,357 -11.14%
22 France 557,382.00 56.00% 428,119.00 43.00% -129,263 -13.00%
23 Poland 449,045.08 44.90% 316,792.38 31.68% -132,253 -13.22%
24 India 514,400.52 51.44% 343,067.22 34.31% -171,333 -17.13%
25 Russia 346,867.00 34.70% 130,000.00 13.00% -216,867 -21.70%
26 Romania**** 574,947.64 57.49% 149,722.87 14.97% -425,225 -42.52%


Income tax rates for lower earners (USD30,000)

Rank Country 1996 Income Tax 2016 Income Tax Difference
Amount Rate Amount Rate Amount Rate
1 Spain 5,980.06 20.00% 7,482.73 25.00% 1,503 5.00%
2 Uruguay 1,800.00 6.00% 2,771.00 9.00% 971 3.00%
3 UAE 0.00 0.00% 0.00 0.00% 0 0.00%
4 Italy 8,079.00 27.00% 7,905.00 26.00% -174 -1.00%
5 Japan 2,632.00 8.80% 2,098.00 7.00% -534 -1.80%
6 Nigeria 5,083.68 16.95% 4,361.23 14.54% -722 -2.41%
7 Belgium** 11,550.75 38.50% 10,459.41 34.86% -1,091 -3.64%
8 USA 5,280.00 17.60% 4,037.00 13.50% -1,243 -4.10%
9 Brazil 6,234.18 20.78% 4,756.49 15.85% -1,478 -4.93%
10 Malta 6,038.00 20.10% 4,459.00 14.86% -1,579 -5.24%
11 Germany*** 4,762.16 15.87% 3,008.09 10.03% -1,754 -5.84%
G7 6,011.26 20.01% 3,932.92 13.24% -2,078 -6.77%
12 China 9,900.00 33.00% 7,500.00 25.00% -2,400 -8.00%
13 UK 5,810.65 19.00% 3,115.36 10.00% -2,695 -9.00%
14 Canada 7,442.00 24.81% 4,659.00 15.53% -2,783 -9.28%
15 Denmark 12,229.20 40.76% 9,068.06 30.23% -3,161 -10.53%
16 New Zealand 7,887.00 26.30% 4,540.00 15.10% -3,347 -11.20%
World 8,226.91 27.42% 4,830.95 16.07% -3,396 -11.35%
17 Croatia 9,686.16 32.29% 6,086.71 20.29% -3,599 -12.00%
18 Australia 7,050.00 23.52% 3,395.00 11.32% -3,655 -12.20%
Europe 9,280.26 30.92% 5,592.00 18.59% -3,688 -12.33%
19 Netherlands 9,728.59 32.43% 5,682.10 18.94% -4,046 -13.49%
BRICs 10,270.43 34.25% 5,684.13 18.95% -4,586 -15.30%
20 France 8,073.00 27.00% 2,708.00 9.00% -5,365 -18.00%
21 Poland 11,952.85 39.84% 6,392.38 21.31% -5,560 -18.53%
22 Russia 10,097.00 33.70% 3,900.00 13.00% -6,197 -20.70%
23 Rep. of Ireland 9,805.33 32.68% 2,321.19 7.74% -7,484 -24.94%
24 India 14,850.52 49.50% 6,580.02 21.93% -8,271 -27.57%
25 Israel 15,000.00 50.00% 4,311.00 14.40% -10,689 -35.60%
26 Romania**** 16,947.64 56.49% 4,008.01 13.36% -12,940 -43.13%


*In this
study, lower earners are defined as those earning USD30,000. Higher earners are defined as those with incomes of USD1million. The calculations are based on a single, unmarried taxpayer with no children.

**For Belgium the income tax data comes from 1999 and 2016

***In Germany, income tax is taken after social deductions and contributions are deducted

****In Romania, for 1996, tax was applied with progressive rates, but since 2005 Romania changed to a fixed quota with a standard rate of 16%, compared to the effective rates shown in the tables

Change in Gross Domestic Product (GDP) since the UHY network was founded in 1986

Rank Country GDP (USD billion) Difference
1986 2016
1 China          611.90      9,306.80 1421.0%
2 India          377.55      2,556.99 577.3%
3 Malaysia             57.64          333.52 478.6%
4 Bangladesh             36.75          165.47 350.3%
BRICs          881.09      3,943.15 347.5%
5 Nigeria          113.63          491.64 332.7%
6 Israel             70.22          283.21 303.3%
7 UAE             92.73          363.85 292.4%
8 Ireland             68.22          257.78 277.9%
9 Pakistan             63.59          231.34 263.8%
10 Egypt             74.79          257.00 243.6%
11 Guatemala             17.25             51.68 199.6%
12 Malta                3.20               9.53 198.1%
13 Poland          205.62          576.28 180.3%
14 Peru             71.07          195.95 175.7%
15 Uruguay             19.25             51.21 166.1%
16 Australia          524.08      1,337.52 155.2%
World    32,632.70    76,565.98 134.6%
17 Argentina          224.79          521.71 132.1%
18 Mexico          548.74      1,244.30 126.8%
19 USA      7,956.50    17,149.17 115.5%
20 Slovakia             49.68          102.48 106.3%
21 Spain          723.59      1,478.28 104.3%
22 New Zealand             83.19          169.67 104.0%
23 Canada          902.53      1,829.33 102.7%
24 Brazil      1,152.43      2,315.20 100.9%
25 UK      1,389.52      2,709.56 95.0%
G7      2,763.87      5,158.18 86.6%
26 Netherlands          465.69          867.65 86.3%
27 Austria 228.36 416.24 82.3%
28 Belgium          292.18          514.21 76.0%
29 Portugal          131.68          229.95 74.6%
Europe    11,084.71    19,264.33 73.8%
30 Jamaica                8.29             14.40 73.8%
31 France      1,653.19      2,808.80 69.9%
32 Czech Republic          133.47          225.62 69.0%
33 Germany      2,232.65      3,747.17 67.8%
34 Puerto Rico             57.29             92.87 62.1%
35 Japan      3,669.13      5,792.43 57.9%
36 Bulgaria             34.78             53.65 54.2%
37 Denmark          223.98          335.55 49.8%
38 Croatia             39.56             58.91 48.9%
39 Italy      1,543.59      2,070.84 34.2%
40 Romania          143.55          190.35 32.6%
41 Russia      1,382.50      1,593.63 15.3%


GDP data from the United States Department of Agriculture.