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The former Conservative chancellor Nigel Lawson introduced parity between capital gains and income taxes in 1988, but this was unpicked a decade later by his Labour successor, Gordon Brown. Using the latest data on capital gains, as recorded by HMRC, Advani estimates that if gains were taxed at the same rates as salaries, an extra £13.8bn could have been collected the in 2016-17, rising to £15.9bn in 2019-20. This was slightly less than someone on median earnings of £30,000, whose effective rate was 21.4%. The top 0.001% – 400 people with earnings of between £9m and £11m – were paying an effective tax rate of just 21%, Advani found. In a paper published last year, based on their HMRC research, they found this type of income was very concentrated at the top, with the 5,000 highest earners receiving 54% of all capital gains.īecause gains are so lightly taxed, the wealthiest pay a far lower share of their earnings to the tax authorities than most workers.
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Photograph: Suzanne Plunkett / Reuters/Reuters Gains from shares attract a maximum tax rate of 20%. The analysis was only possible because Advani and his fellow researchers were given access to a secure room at HMRC, where they were able to view anonymised tax returns for the super-rich. Much of the information about the capital gains of the wealthiest 1% of taxpayers is not available in any public dataset. It is hard to explain why people who are more able to restructure their income in this way should pay less than those who can’t,” Advani said. “We’ve seen that by reducing capital gains tax rates, the primary thing it has done is encourage people to take income as capital gains, reducing tax take without providing any wider benefits. The analysis was carried out for the Guardian by Arun Advani, the assistant professor of economics at the University of Warwick’s CAGE Research Centre and a research fellow specialising in tax at the Institute for Fiscal Studies. Their median income grew by 22% between 20. By contrast, this group’s salaries have not grown as fast. Among the extremely rich – the 50,000 people who make up the 0.1% – the amount declared in capital gains grew by 213% between 20.