Tax cuts UK: Londoners 7 times more likely to benefit than Northerners after mini budget scraps top tax rate

Fewer than 2% of high earners set to benefit from scrapping England’s 45p additional rate tax live in the North East, with more than a third living in London, analysis by NationalWorld shows.

Experts from the Institute for Public Policy Research North (IPPR North) think tank said the move will disproportionately benefit the wealthiest in the capital and wider South East, leaving  “ordinary people” in places like the North East “out in the cold”.

There are almost 600,000 high earners across England, Northern Ireland and Wales who will benefit when the 45p additional rate of income tax is abolished – just 1.2% of the population aged 16 or above, according to NationalWorld analysis of HMRC data. Scotland’s First Minister, Nicola Sturgeon, has said following the UK Government’s plan would be “a serious error”, with the additional rate expected to remain north of the border.

The vast geographical differences show 36.1% of England’s high earners live in London and almost a quarter (24.5%) live in the South East. The North East has the lowest proportion of high earners in the country with just 1.4% followed by Yorkshire and the Humber with 4.0%.Overall, Londoners are seven times more likely to benefit from high earning tax cuts than in the North East.

The analysis comes after the pound plunged to an all time low after Chancellor of the Exchequer Kwasi Kwarteng announced major tax cuts in a bid to tackle the energy crisis and inflation rates. One of the plans is to scrap the additional 45% rate of income tax on annual income above £150,000 from 6 April 2023. The move means all annual income above £50,270 will be taxed at 40%, the current higher rate of income tax.

The richest people in England

HMRC projections on income tax for 2022/23 shows 570,000 people in England will benefit from the tax cut, representing 1.2% of the 16+ population. Londoner has the greatest proportion of high earners, with 2.9% of its population earning £150,000 or more, followed by 1.9% in the South East.

The North East has the lowest proportion of population earning a high income with 0.4% earning £150,000 or more, this represents 8,000 people. The interactive map below shows how many high earners live in your local region.

Despite the current cost of living crisis and a decade of austerity, the rich are becoming richer in England with the number of high earners three times greater in 2022 than in 2010 with the number surging 167%. The number increased from 214,000 in 2010 to 571,000 in 2022. The East Midlands has seen the greatest increase in high earners with the number rising from 8,000 to 25,000 during the same period, a growth of 213%.

How does the rest of the UK compare?

High earners in Northern Ireland and Wales will also benefit from the 45p tax cut, affecting an additional 15,000 people. There are 9,000 high earners in Wales, representing 0.3% of the country’s population, and 6,000 in Northern Ireland (0.4%). Proportionally, 1.5% of high earners in the UK live in Wales and 1% live in Northern Ireland.

However, Scottish Government First Minister, Nicola Sturgeon, has already ruled out following the UK Government’s budget saying it would be “a serious error”. In comparison to elsewhere in the UK, 0.7% of Scotland’s population earn £150,000 or more. In total 31,000 people are high earners with the number increasing 182% from 11,000 in 2010.

‘Deeply concerning’

Marcus Johns, research fellow at IPPR North, said the package outlined by Chancellor Kwasi Kwarteng last week was “regressive” and benefited the wealthiest in society.

“It contained red flags about the Government’s commitment to levelling up,” he said.

“Today’s analysis by NationalWorld shows that the alarming package of tax cuts will disproportionately benefit the very wealthiest, particularly those living in London and the South East – leaving ordinary people, especially those in places like the North out in the cold.

“After a decade of austerity that eroded the resilience of places across the North, these measures look set to destabilise government finances which could further damage the public services on which we all rely.

“Levelling up cannot be achieved by cutting back. The deep inequalities in our country across healthy life expectancy, work, incomes and more will only widen as a result of the Government’s approach. There are better reasons to invest in the UK than this. We need to see a power shift and investment led approach to our economy, to empower places to level up for themselves”.

‘Everyone will see a tax cut in April’

A spokesperson for HM Treasury said the income tax cuts and changes to National Insurance mean more people will pay less tax, for example someone earning £30,000 will pay £400 less tax next year.

They said: “Everyone will see a tax cut in April thanks to yesterday’s Growth Plan. Our pro-growth tax system will deliver annual tax cuts of £45 billion per year by 2026/27 - the biggest tax cut in generations.”