UK inequality grows as top 1% of earners get 17% of nation's income

UK inequality grew as the highest paid 1% of British earners received nearly 17% of all national income before the Covid-19 crisis.

According to a study by the Resolution Foundation and Warwick University, the top 1% had a growing and much bigger slice of income than previously thought as some taxable capital gains were concentrated among the richer.

Official data showed that in 2017-18 there were £55bn of taxable capital gains recorded and the majority of these (£34bn) were received by 9,000 individuals, who each made gains of £1m or more.

The income share of the top 1% in 2017-18 was 16.8% rather than the 13.8% previously thought before including the taxable capital gains. The top 0.1% received 8.1% rather than 5.6%.

According to the Guardian, Andrew Summers, assistant professor at the LSE, said: “Capital gains are taxed at much lower rates than regular income, but the legal line between these is very blurred. This means business managers have a big tax incentive to take their rewards as gains instead of salary or dividends. When we look at the types of gain going to people at the very top, that’s exactly what we find. A lot of capital gains are, in fact, just repackaged income going to the already-rich.”

The report noted that capital gains had fallen sharply during the financial crash of 2008-09 and were likely to follow the same pattern during the current coronavirus crisis.

Anneliese Dodds, the shadow chancellor, said: “This groundbreaking research demonstrates clearly how capital gains reveal an unequal society and the challenge ahead to undo a decade of rising inequality.

“This pandemic has shown how many low-paid workers are taking enormous risks to keep us all safe. We must have a fairer settlement after this crisis - with those with the broadest shoulders making more of a contribution”.