How hitting the ‘broadest shoulders’ in the Autumn Budget could end up costing the Treasury billions
The government has promised that tax rises in next week’s Budget will hit those with the ‘broadest shoulders’ – what could this mean for the ultra-wealthy?
The impending Autumn Budget is expected to hit those with the “broadest shoulders” the hardest, but research suggests this could put billions of pounds of tax income at risk for the Treasury.
Chancellor Rachel Reeves is expected to raise taxes in her first Budget on 30 October.
Nothing has been confirmed yet but there are rumours that income tax thresholds - already held under the previous Tory government until 2028 - will remain frozen for longer, creating fiscal drag.
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It is also being reported that capital gains tax could also be increased.
Explaining the plans to address shortfalls in public finances in August, Prime Minister Keir Starmer said “those with the broadest shoulders should bear the heavier burden.”
But research shows just how much of a burden this could create for small numbers of taxpayers, creating a risk that this cohort leaves the UK and takes their money with them.
Meanwhile, fiscal drag will continue pushing everyone else’s tax bills higher as their income pushes them into the next tax band faster, including pensioners.
Who has the broadest shoulders?
The chancellor has promised not to raise taxes on working people. This includes income tax, national insurance (NI) and VAT. There are rumours of plans to raise the NI paid by employers though.
This leaves other options on the table, such as keeping thresholds frozen and raising wealth taxes such as capital gains tax and inheritance tax.
But hitting the wealthiest could have consequences.
Analysis by BBC News earlier this month found that 60 of the wealthiest people in the UK collectively contributed more than £3 billion in income tax during 2021/2022, with each reporting an income of at least £50 million.
Separate analysis by Wealth Club found the top 100 taxpayers in the UK collectively paid £3.9 billion of income and capital gains tax in 2022/2023, the equivalent of £39 million each.
The UK’s top 1,000 taxpayers footed an average tax bill of £10.4 million each, and paid more than 4% of HMRC’s annual tab, according to a freedom of information request made by Wealth Club.
The data also shows that Britain’s top 10,000 taxpayers footed an average tax bill of £2.5 million each in 2022/2023 from income and capital gains tax which means that collectively they paid almost a tenth of HMRC’s annual tab, despite accounting for just 0.03% of UK taxpayers.
Alex Davies, founder of Wealth Club, said these numbers demonstrate just how reliant the tax system already is on a very small number of individuals.
“The ultra-wealthy are a mobile bunch, proven by the fact that an estimated 9,500 millionaires are expected to leave the UK this year,” says Davies.
“If just the top 100 taxpayers decided to move overseas that would rise to £3.9 billion less revenue for HMRC, and if the top 1,000 taxpayers migrated out of the UK, that figure would rise to £10.4 billion less in receipts.
"That’s not just this current tax year, but also each subsequent year, leaving huge holes in the country’s finances and draining the economy of the entrepreneurs and investors who start and support young businesses.”
Meanwhile, more pensioners could be dragged into paying tax if thresholds remain frozen.
Calculations by wealth manager Quilter suggest 3.1 million retirees are already on track to be pulled into higher tax brackets by 2027/2028 due to state pension increases under the triple lock.
But Quilter warns that up to 1.5 million extra pensioners could be pushed into higher brackets if tax thresholds remain frozen for even longer.
“Compounding this pressure, Reeves’ decision to axe the Winter Fuel Payment adds salt to the wound,” says Jon Greer, head of retirement policy at Quilter.
“For many, this payment has been essential in managing rising energy costs, and without it, pensioners will face mounting expenses just as more of their income is being taxed. Together, these policies threaten to squeeze pensioners from all sides, making it more important than ever to seek guidance or financial advice to navigate this difficult landscape.”
For those who are already withdrawing from their pension, Greer said it is important to only take as much money as you need each tax year, as the less you withdraw, the less income tax you will pay.
He adds: “Similarly, it is important to remember how much pension income you will have, including your state pension income, as it is also taxable.
“If you have reached state pension age but do not wish to retire, you have the option to defer your state pension. If you reach state pension age on or after 6 April 2016 and opt to defer it, for every nine weeks you defer, your state pension will increase by 1%.
"While this can be a good option for those who are still working and do not yet require their state pension funds, it is important to remember that the additional amount is then paid with your regular state pension payment and could be subject to tax."
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Marc Shoffman is an award-winning freelance journalist specialising in business, personal finance and property. His work has appeared in print and online publications ranging from FT Business to The Times, Mail on Sunday and the i newspaper. He also co-presents the In For A Penny financial planning podcast.
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