London and the South-East now shoulder 45 per cent of Britain’s total income tax burden, contributing £240.7billion of receipts nationally, it has been revealed.
One of the most notable findings shows the London borough of Wandsworth alone paid £4.26billion in income tax during the 2022-2023 tax year.
This single borough contributed more than the combined total of Leeds and Birmingham – two of Britain’s largest cities – which together paid £4.23billion.
Accountancy firm HY Hacker Young ’s research highlights major regional differences in how income tax contributions are distributed across the UK.
London on its own now accounts for 26.5 per cent of all income tax collected across the UK, according to the research findings.
All of the top 20 areas ranked by highest tax paid per person are located in either London or the South-East.
Income tax receipts generated in London have increased significantly over the past decade, rising 80.7 per cent from £35.3billion to £63.8billion.
Across the rest of the UK, income tax receipts increased by 48.4 per cent over the same period.
The capital alone generates more than a quarter of national income tax receipts
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Several tax policy changes have contributed to the widening gap between London, the South-East and other regions.
In April 2023, the Government lowered the additional rate tax threshold from £150,000 to £125,140, moving more taxpayers into the 45 per cent band.
At the same time, personal allowances and higher rate thresholds have remained frozen for several years.
This process, often referred to as fiscal drag, increases the number of taxpayers paying higher rates of tax as wages rise over time.
Wandsworth pays more income tax than Leeds
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The South-East has remained one of the largest contributors to Treasury income tax revenues throughout the past 10 years.
Neela Chauhan, partner at UHY Hacker Young, said: “London and the South-East now account for almost half of the UK’s entire income tax take.”
She added: “Obviously, that reflects the sheer concentration of high earners in the South-East but it also reflects years of tax policy geared towards shifting more of the tax burden onto higher earners.”
The regional differences extend beyond central London and the capital’s highest earning areas.
Hackney pays more income tax than Glasgow
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GettyHackney contributed £1.54billion in income tax, according to the research.
This total exceeded the City of Glasgow’s total income tax contribution of £1.35billion.
Ms Chauhan said: “Freezing allowances and reducing the additional rate threshold has pulled ever more taxpayers into higher bands, driving a sharp rise in revenues from London in particular up more than 80 per cent over the past decade.
“While this underlines how dependent the Exchequer has become on London and the South-East, it also raises concerns about the long term competitiveness of the UK tax system and the risk that persistently higher tax burdens could push some high earners to relocate abroad or reduce their economic activity.
“Anecdotal evidence suggests that this is happening and that the shift of taxes onto the higher earners has got to the point that it is detrimental for the UK economy.”
